Chapter 14 14 1 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 ID: 197588
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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 requisitionProduction OperationsCost Accounting14-3Slide4
Production Cycle Process
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1. Product Design
2. Planning and Scheduling
Threats
Controls
Poor product design resulting in excess costs
Over and under production
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
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3. Production Operations
Threats
Controls
Inventory theft
Fixed asset theft
Poor performance
Suboptimal investments in fixed assets
Loss of inventory or fixed assets due to fire or disasters
Disruption of operations
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 disposals3 a. Performance reporting4 a. Solicit competitive bids5 a. Insurance and physical safeguards6 a. Backup and disaster recovery plans
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4. Cost Accounting
Threats
Controls
Inaccurate cost data
Inappropriate allocation of overhead costs
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
Production cycleBill of materials
Operations list
Manufacturing resource planning (MRP-II)
Lean manufacturingMaster production schedule (MPS)Production orderMaterials requisitionMove ticketComputer-integrated manufacturing (CIM)Request for proposal (RFP)Job-order costingProcess costingJob-time ticketManufacturing overheadActivity-based costing
Cost driver
Throughput
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