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- 1. Ch. 14 - The Production Cycle
- 2. Cycle of Business Activities Capital Capital Investment Investment Financing Cycle Sale Revenue Cycle Input General Ledger and Acquisition Reporting System Expenditure Human Cycle Production Resource Cycle Payroll Cycle Hire & Conversion pay employees
- 3. Production Cycle Context Diagram Figure 14-1 Customer orders Purchase Revenue requisitions Expenditure Cycle Sales Cycle forecast Production Overhead/ Cycle Raw materials Finished goods COGM Labor needs G/L and Reports Reporting Labor H/R & System costs Payroll Management Cycle
- 4. Production Cycle Context Diagram Figure 14-1 Customer orders Revenue Cycle Sales forecast Production Cycle
- 5. Production Cycle Context Diagram Figure 14-1 Customer orders Purchase Revenue requisitions Expenditure Cycle Sales Cycle forecast Production Overhead/ Cycle Raw materials
- 6. Production Cycle Context Diagram Figure 14-1 Customer orders Purchase Revenue requisitions Expenditure Cycle Sales Cycle forecast Production Overhead/ Cycle Raw materials Finished goods Labor needs Labor H/R & costs Payroll Cycle
- 7. Production Cycle Context Diagram Figure 14-1 Customer orders Purchase Revenue requisitions Expenditure Cycle Sales Cycle forecast Production Overhead/ Cycle Raw materials Finished goods COGM Labor needs G/L and Reports Reporting Labor H/R & System costs Payroll Management Cycle
- 8. Production Cycle Activities Product design Production planning and scheduling Production Operations Cost Accounting
- 9. Product Design VCR Bill of Materials Bill of materials Control Unit - 1 » Exploded to determine Back Panel - 1 Side Panel - 4 production needs Timer - 1 Front Panel - 1 Screw - 6 Operations list VCR Operations List (routing sheet) Assembly - .15 hour Finishing - .1 hour Testing - .2 hour
- 10. Production Cycle Level 0 Diagram Figure 14-2 abbreviated Costs Cost Accounting Operations List 1.0 Bill of materials Product Design
- 11. Planning & Scheduling MRP - II » Push manufacturing » long-term planning JIT » Pull (lean) manufacturing » short-term planning
- 12. Master Production Schedule Specifies what, when and how much to produce based on customer orders, sales forecasts and FG inventory levels “Explodes” bill of materials to determine raw material needs Produces production order, materials requisition and move See Figure 14-6 tickets
- 13. Production Cycle Level 0 Diagram – Figure 14-2 Planning and Scheduling abbreviated Sales Forecasts Revenue Cycle Customer Orders 2.0 Planning and Scheduling Bill of materials Raw materials
- 14. Production Cycle Level 0 Diagram – Figure 14-2 Planning and Scheduling abbreviated Sales Forecasts Revenue Cycle Customer Orders 2.0 Planning and Operations List Labor Scheduling Available Bill of materials HRM/ Payroll Cycle Raw materials
- 15. Production Cycle Level 0 Diagram – Figure 14-2 Planning and Scheduling abbreviated Expenditure Cycle Purchase Requisitions 2.0 Planning and Scheduling Production orders, Material requisitions, And move 3.0 tickets Production orders Production Operations
- 16. Production Cycle Level 0 Diagram – Figure 14-2 Planning and Scheduling abbreviated Sales Forecasts Expenditure Revenue Cycle Cycle Purchase Requisitions Customer Orders 2.0 Planning and Operations List Labor Scheduling Available Bill of materials HRM/ Payroll Cycle Production orders, Raw materials Material requisitions, And move 3.0 tickets Production orders Production Operations
- 17. Production Order Authorizes the start of production Identifies quantity to be produced, production departments required, and final destination Production Order - Job #100: 660 units of Item #3072 See Figure 14-7
- 18. Materials Requisition Authorizes release of raw materials into production Serves as source document for journal entry transferring raw materials to WIP Exploded bill of material Materials Requisition - (see Figure 14-8)
- 19. Accounting for Transfers of Materials Dr. Cr. Work in process inventory - Job #100 XX Raw materials inventory XX Materials Requisition for Job #100
- 20. Move Ticket Documents transfers of production between departments Move Ticket Job #: 100 Moved from: Assembly Moved to: Finishing Quantity transferred: 675 units Time: 10/5 8:45 a.m. See Figure 14-9
- 21. Production Operations Track: •raw materials used •labor expended •machine operations performed •other manufacturing overhead costs incurred
- 22. I/T for Materials Handling •Bar-coding/conveyer belts •RFID tags Located by radio signal No scanning Up to 40X faster than bar codes Not affected by dirt Not required to be in line of sight Continuous monitoring capabilities
- 23. Production Cycle Level 0 Diagram – Figure 14-2 Production Operations abbreviated 3.0 Job time tickets, Production move tickets and material requisitions, Operations 4.0 Cost Accounting Production orders, Material requisitions, 2.0 And move tickets Planning Production orders And Scheduling
- 24. Cost Accounting •Information for planning and control •Captures cost data •Calculates inventory and COGS •Job order vs. process costing
- 25. Accounting for Direct Labor Inputs Dr. Cr. Work in process inventory - Job #100 XX Direct Labor XX JobTicket Welding Dept.: Job #100 30 hours Job #100 30 hours Or on-line entry via terminals, badges or bar code readers
- 26. Allocating Overhead Dr. Cr. Work in process inventory - Job #100 XX Factory Overhead XX Activity base Predetermined (labor hours, Overhead Rate X # of setups, machine hours, etc.)
- 27. ABC Overhead Allocation Better decisions/improved cost management both financial and nonfinancial measures need to be captured by the AIS G/L may need to be completely revamped!
- 28. Transfers of Completed Goods Dr. Cr. Finished goods inventory - Item #3072 XX Work in process inventory - Job #100 XX Finished Goods Report Job #100 - 675 units
- 29. Cost Accounting System Records Job Cost Ledger Job #100 Job #101 - OR - Job Cost File
- 30. Cost Accounting System Records Fixed Asset Records » ID #, Serial #, Location, Cost, Depreciation info » Formal procedures for competitive bids » RFID tags for preventive maintenance
- 31. Production Cycle Level 0 Diagram – Figure 14-2 Cost Accounting abbreviated 4.0 Cost Operations List Labor Accounting Costs Bill of materials HRM/ Payroll Cycle Job time tickets, move tickets and 3.0 material requisitions Production Raw material Operations And Expenditure Overhead costs Cycle
- 32. Production Cycle Level 0 Diagram – Figure 14-2 Cost Accounting abbreviated Revenue G/L and Cycle reporting system Cost of goods manufactured Finished Goods 4.0 Cost Accounting Work in process Finished goods
- 33. Production Cycle Level 0 Diagram – Figure 14-2 Cost Accounting abbreviated Revenue G/L and Cycle reporting system Cost of goods manufactured Finished Goods 4.0 Cost Operations List Labor Accounting Costs Bill of materials HRM/ Payroll Work in process Cycle Job time tickets, move tickets and Finished goods 3.0 material requisitions Production Raw material Operations And Expenditure Overhead costs Cycle
- 34. Opportunities for IT Coded ID Cards/Badge Readers/ Electronic Time Clocks On-line Data Entry Computer-integrated Manufacturing (CIM) Real-Time Production Information » machine monitoring » production status » product recall » inventory management
- 35. Transaction Authorization Production Materials manager/supervisor Requisition authorizes Inventory control releases material
- 36. Security for Assets and Records Restricted physical access Goods controlled and released only upon approved material requisition or shipping request Documented material movement Insurance Backup files/power and disaster recovery procedures Access controls and encryption
- 37. Segregation of Duties Between: Inventory Records and Warehouse Production Factory and Control
- 38. Segregation of Duties Cost General and Accounting Accounting Both are recording functions, so segregation of duties is not necessary. However, if one person maintains the job subsidiary ledger and another maintains the general ledger, it’s a check and balance when the WIP account is reconciled at the end of the month. So if you can segregate, do so.
- 39. Adequate Documents and Records Prenumbered and accounted for (production orders, material requisitions, finished goods reports) Periodic counts of inventory and fixed assets with reconciliation to perpetual records
Notas del editor
- Capital investment Raise capital/ Acquire property/ periodically report Input acquisition Obtain/ Receive / Record obligationn/ pay Conversion Consume labor materials and o/h Sales Receive order/ Deliver/ request payment/ receive payment