Transcript The Production Cycle

The Production Cycle
Chapter 14
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Learning Objectives
• Describe the major business activities and
related information processing operations
performed in the production cycle.
• Identify major threats in the production cycle
and evaluate the adequacy of various control
procedures for dealing with those threats.
• Explain how a company’s cost accounting system
can help it achieve its manufacturing goals.
• Discuss the key decisions that must be made in
the production cycle and identify the
information required to make those decisions.
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Production Cycle Process
• 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
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Production Cycle Process
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1. Product Design
2. Planning and Scheduling
Threats
Controls
1.
1 a. Analysis of costs arising from
product design choices
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
Poor product design
resulting in excess costs
2. Over and under production
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3. Production Operations
Threats
Controls
1.
2.
3.
4.
1 a. Restrict physical access
b. Document movement of
inventory
c. Segregation of custody duties
from authorization and
recording
2 a. Restrict access to fixed assets
b. Keep detailed records of fixed
assets including disposals
3 a. Performance reporting
4 a. Solicit competitive bids
5 a. Insurance and physical
safeguards
6 a. Backup and disaster recovery
plans
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Inventory theft
Fixed asset theft
Poor performance
Suboptimal investments in
fixed assets
5. Loss of inventory or fixed
assets due to fire or disasters
6. Disruption of operations
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4. Cost Accounting
Threats
Controls
1. Inaccurate cost data
2. Inappropriate allocation of
overhead costs
3. Misleading reports
1 a. Source data automation
b. Data processing integrity
controls
2 a. Time-driven activity-based
costing
3 a. Performance metrics
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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
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Key Terms
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Production cycle
Bill of materials
Operations list
Manufacturing resource
planning (MRP-II)
Lean manufacturing
Master production schedule
(MPS)
Production order
Materials requisition
Move ticket
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• Computer-integrated
manufacturing (CIM)
• Request for proposal (RFP)
• Job-order costing
• Process costing
• Job-time ticket
• Manufacturing overhead
• Activity-based costing
• Cost driver
• Throughput
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