Accounting Information Systems: The Production Cycle

Accounting Information Systems
Fourteenth Edition, Global Edition
Chapter 14
The Production Cycle
Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Learning Objectives (1 of 2)
• Describe the major business activities and key decisions
that must be made in the production cycle, the threats to
accomplishing production cycle objectives, and the
controls that can mitigate those threats.
• Explain the key decisions and information needs in
product design, the threats to those activities, and the
controls that can mitigate those threats.
planning and scheduling production, the threats to
those activities, and the controls that can mitigate those
threats.
Copyright © 2018 Pearson Education, Ltd. Chapter 14: The Production Cycle Slide 1 - 2
Learning Objectives (2 of 2)
production operations, the threats to those activities, and
the controls that can mitigate those threats.
• Explain the key decisions and information needs for
accurate cost accounting, threats to those activities, and
the controls that can mitigate those threats.
Production Cycle Process (1 of 2)
• Product Design
– Source documents: bill of materials and operations list
• Planning and Scheduling
– Source documents: Master production schedule, production order,
and materials requisition
• Production Operations
• Cost Accounting
Production Cycle Process (2 of 2)
General Issues
Threats Controls
1. Inaccurate/Invalid master data 1 a. Data processing integrity
2. Unauthorized disclosure of controls
sensitive information b. Restrict access to master data
3. Loss or destruction of data c. Review changes to master
data
2 a. Access controls
b. Encryption
3 a. Backup and disaster recovery
procedures
Product Design
• Create a product that meets customer requirements
• Generates two output documents:
– Bill of materials
– Operations list
Planning and Scheduling
• Two types of production planning
– Manufacturing resource planning (MRP-II)
– Lean manufacturing
• Documents from Planning and Scheduling
– Production order
– Materials requisition
– Move tickets
1. Product Design
2. Planning and Scheduling
Threats Controls
1. Poor product design resulting in 1 a. Analysis of costs arising from

excess costs product design choices
2. Over and under production b. Analysis of warranty and repair
costs
2 a. Production planning systems
b. Review and approve
production orders and
schedules
c. Restrict access to orders and
schedules
3. Production Operations
Threats Controls
1. Inventory theft 1 a. Restrict physical access
2. Fixed asset theft b. Document movement of
3. Poor performance inventory
c. Segregation of custody duties
4. Suboptimal investments in fixed
assets from authorization and recording
5. Loss of inventory or fixed assets 2 a. Restrict access to fixed assets
due to fire or disasters b. Keep detailed records of fixed
assets including disposals
6. Disruption of operations
3 a. Performance reporting
4 a. Solicit competitive bids
5 a. Insurance and physical safeguards
6 a. Backup and disaster recovery
plans
Cost Accounting Systems
• Provide information for planning, controlling, and
evaluating the performance of production operations
• Provide accurate cost data about products for use in
pricing and product mix decisions
• Collect and process the information used to calculate the
inventory and cost of goods sold values that appear in
organization’s financials
4. Cost Accounting
Threats Controls
1. Inaccurate cost data 1 a. Source data automation
2. Inappropriate allocation of b.Data processing integrity
overhead costs controls
3. Misleading reports 2 a. Time-driven activity-based
costing
3 a. Performance metrics
Key Terms
• Production cycle • Computer-integrated manufacturing
(CIM)
• Bill of materials
• Request for proposal (RFP)
• Operations list
• Job-order costing
• Manufacturing resource planning
(MRP-II) • Process costing
• Lean manufacturing • Job-time ticket
• Master production schedule (MPS) • Manufacturing overhead
• Production order • Activity-based costing
• Materials requisition • Cost driver
• Move ticket • Throughput

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Accounting Information Systems

Fourteenth Edition, Global Edition

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

1. Poor product design resulting in 1 a. Analysis of costs arising from

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