Chapter 9 The Production Business Process
Chapter 9 The Production Business Process. Presentation Outline I.Files and Reports in a Production System II.Production Control Application System III.Property.
Dec 22, 2015
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Chapter 9The Production Business Process
Presentation Outline
I. Files and Reports in a Production System
II. Production Control Application System
III. Property Accounting Applications
IV. Quick-Response Manufacturing Systems
I. Files and Reports in a Production System
A. Production Order
B. Bill of Materials
C. Master Operations List
D. Materials Requisitions
E. Job Time Cards
F. Resource Availability Reports
G. Production Status Reports
A. Production Order
Production control issues production orders to authorize production departments to make
certain products.
We are ready to begin this
order.
B. Bill of Materials
A bill of materials is a listing of the
ingredients that go into making a product.
It lists of all the required parts and their descriptions.
What materials do we need to make this product?
C. Master Operations List
A master operations list specifies the
sequencing of all labor and/or machine
operations that are necessary to produce a
product.
D. Materials Requisitions
Production control prepares materials
requisitions to authorize the release of raw materials from inventory for use in
production.
E. Job Time Cards
Job time cards are used to document the
amount of labor time that is spent on each production order or
job.
F. Resource Availability Reports
Inventory status reports detail the material
resources available in inventory for production.
Factor availability reports communicate the
availability of labor and machine resources for
production.
We have the materials, but may have to schedule some
overtime for this job.
G. Production Status Reports
Production status reports detail the work completed on individual production
orders as they move through production.
Open production orders are monitored and
departmental production schedules are revised as
necessary.
II. Production Control Application System
A. The Role of Production Control
B. Accounting for the Factors of Production
C. Completion of the Production Order
D. Inventory Control
E. Just-In-Time Production
A. The Role of Production Control
1Production
Order 3
2
Production Departments
Production Control
Inventory Control
Cost Accounting
General Ledger
1Production
Order
2Production
Order
N
InventoryStatusReport
Finished Goods Raw Materials
InventoryStatusReport
FactorAvailability
Report
FactorAvailability
Report
2 1ProductionSchedule
D
1ProductionSchedule
B. Accounting for the Factors of ProductionProduction
DepartmentsProduction
ControlInventory Control
Cost Accounting
General Ledger
3 2
1Materials
Requisition
N
2 1
MaterialsRequisition
1Materials
Requisition
NPost to WIP
Records
JournalVoucher
JournalVoucher
Materials Placed in Production
ProductionStatus
ProductionStatus
Job Time Cards Job Time Cards
Post to WIP Records
JournalVoucher
JournalVoucher
Conversion Costs
C. Completion of the Production Order
3 2
Production Departments
Production Control
Inventory Control
Cost Accounting
General Ledger
1Production
Order
1Production
Order 2Production
Order
N Completed 2
ProductionOrder
Post to Inventory Records
Completed 2Production
Order
Summarize Production
JournalVoucher
JournalVoucher
Cost of Goods Manufactured Completed
ProductionCost Report
To Management
D. Inventory Control2RS
PIEOQ =
where
EOQ = economic order quantity (units) R = requirements for the item this period (units)S = purchasing cost per order P = unit cost I = inventory carrying cost per unit expressed as
a percentage of the period inventory value
The EOQ must balance the total carrying cost against the total ordering cost. Once the EOQ is determined, the reorder point must
be decided:
Reorder point = lead time x average inventory usage rate
E. Just-In-Time Production
Just-in-time (JIT) production describes a production system in which parts are only
produced as required in subsequent operations.JIT systems differ from conventional production
systems in that inventories of work-in-process, raw materials, and finished goods are minimized
or totally eliminated.
III. Property Accounting Applications
Fixed Assets Maintain adequate records
that identify assets with description cost, and physical
location. Provide for appropriate
depreciation and/or amortization calculations for
book and tax purposes. Provide for reevaluation for
insurance and replacement-cost purposes.
Provide management with reports for planning and controlling the individual
asset items.
InvestmentsA common control practice
with respect to the physical handling of
investment securities is to require two people to
be present when the firm’s safe deposit box or other depository is
entered.
IV. Quick-Response Manufacturing Systems
A. Defining Quick-Response Manufacturing Systems
B. The Physical Manufacturing System
C. The Manufacturing Resource Planning (MRP) System
D. MRP II versus MRP
E. Advanced Integration Technologies
F. Internal Control Considerations
G. Activity-Based Costing
Quick-Response Manufacturing System
A. Defining Quick-Response Manufacturing Systems
• A computer integrated manufacturing CIM system integrates the physical manufacturing system and the manufacturing resource
planning (MRP II) systems.• A quick-response manufacturing system is a CIM system that is
integrated with advanced integration technologies.
Physical Manufacturing
System
Physical Manufacturing
System
CADD CAM
ManufacturingResource Planning
(MRP II)
ManufacturingResource Planning
(MRP II)
MRP
Computer Integrated Manufacturing (CIM) System
Electronic DataInterchange (EDI)
Automatic Identifcation
Advanced Integration Technologies
B. The Physical Manufacturing System
1. Computer-Aided Design and Drafting (CADD)
2. Computer-Aided Manufacturing (CAM)
1. Computer-Aided Design and Drafting (CADD)CADD uses computer software to
perform engineering functions.Designers can store product
designs on computer. These designs can be recalled and
manipulated as needed.Solids modeling is the
mathematical representation of a part as a solid object in computer
memory.Finite element analysis is a
mathematical model used to determine mechanical
characteristics, such as stresses of structures under load.
2. Computer-Aided Manufacturing (CAM)CAM systems are useful in
planning and obtaining feedback from the
manufacturing process.Statistical process control
considers whether process outputs are within
acceptable variations from engineering specifications.
A type of CAM known as a flexible manufacturing
system is a programmable production process that can be quickly reconfigured to produce different products.
There seems to be a problem with the stamping process.
C. The Manufacturing Resource Planning (MRP) System
MRP systems include the following four subsystems:
1. Production Planning
2. Production Scheduling
3. Cost Accounting
4. Reporting
1. Production Planning
MarketingMarketing
ProductionPlanningProductionPlanning
1
1. Production requirements for manufactured inventory depend on sales forecasts developed as a part of the budget process.
Bill ofMaterials
MasterOperations List
1. Production Planning
MarketingMarketing
ProductionPlanningProductionPlanning
1
2. The sales forecast must be related to the amount of eachproduct that is already held in finished goods inventory.
InventoryControlInventoryControl
2
Bill ofMaterials
MasterOperations List
1. Production Planning
MarketingMarketing
ProductionPlanningProductionPlanning
1
3. Raw materials available for production are communicated throughraw materials status reports.
InventoryControlInventoryControl
2
3
Bill ofMaterials
MasterOperations List
1. Production Planning
MarketingMarketing
ProductionPlanningProductionPlanning
1
4. Labor and machine resources available for production are communicated through a factor availability report.
InventoryControlInventoryControl
2
3 ProductionDepartments
ProductionDepartments
4
Bill ofMaterials
MasterOperations List
1. Production Planning
MarketingMarketing
ProductionPlanningProductionPlanning
1
5. The processing of production orders results in a master production schedule.
InventoryControlInventoryControl
2
3 ProductionDepartments
ProductionDepartments
4
5
Bill ofMaterials
MasterOperations List
2. Production Scheduling
Routings (RTGs) indicate the sequence of operations required to manufacture a product and contain information about the work center, length of time, and tooling required
to perform each task.Each RTG contains a production order number. As tasks are completed information is input into the computer system
to update the production status file.A scheduling application program uses linear programming
and other techniques to determine the optimal assignment of available resources to production.
3. Cost Accounting
The central feature of the cost-accounting application
is the updating of the production-status (Work-
in-Process) file.As orders are completed, the related work-in-process
record is closed and a record is created to update the finished inventory file.
4. ReportingThe completed production-
order file lists all cost data for completed production
orders. Outputs of processing this file include an updated finished goods inventory file and a stock
status report.Variances between standard and actual costs are determined to assist in
control of production.
D. MRP II versus MRP
An MRP II system includes the major processing modules of MRP. Some extensions added with MRP II
include:Extensions to bill-of-materials processing might
include maintenance of engineering/product drawings from a CADD system.
Extensions to routings filings might include expanded information concerning work center capacity data and
maintenance of machine tooling data.
E. Advanced Integration Technologies
1. Automatic identification enhances integration
by putting machine-readable codes on products
and materials.
2. EDI enhances integration by integrating the
systems of suppliers and customers.
3. Distributed processing enhances integration by
combining geographically dispersed resources
into a single system.
F. Internal Control Considerations
In quick-response manufacturing systems, internal control can become a problem because transactions can be completed with no human intervention. Since it is not feasible to install
controls after implementation, controls must be implemented during systems design and
implementation .
G. Activity-Based Costing
CIM integrates the physical manufacturing system and manufacturing resource planning (MRP II) systems.
Activity-based costing (ABC) is particularly well suited to a CIM environment because
both ABC and CIM consider the processes that go into making a product, and
CIM’s use of technology results in a less labor-intensive manufacturing environment. This can
increase the need for more accurate overhead allocations.
SummaryProduction System Forms and ReportsThe Production Application System
Physical Manufacturing SystemMaterial Requirements Planning (MRP)
Advanced Integration TechnologiesInternal Control Considerations
Computer-Integrated Manufacturing and Activity-Based Costing
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