Chapter 14 - The Production Cycle

MRP-II

Manufacturing Resource Planning - Seeks to balance existing production capacity and raw materials needs to meet forecasted sales demands - Push manufacturing; goods are produced in expectation of customer demand

MPS

Master Production Schedule - Specifies how much of each product is to be produced during the planning period - Specifies when the production should occur

Productive processing time

Processing time / Total time

Who is responsible for the authorization function in the production operations activity?

Production planners or the Production IS

RFP

Request for Proposal - Specifies the desired properties of an asset - Sent to each prospective supplier - Used for orders for machinery and equipment

Productive capacity

Total units produced / processing time

CIM

Computer-Integrated Manufacturing - Using IT in the production process

What are the three separate categories of overhead identified by activity-based costing systems?

(1) Batch related overhead (2) Product-related overhead (3) Companywide overhead

What are the two outputs generated by the product design activity?

(1) Bill of materials (2) Operations list

What are the four divisions of quality controls costs?

(1) Prevention costs (2) Inspection costs (3) Internal failure costs (4) External failure costs

What are the four basic activities in the production cycle?

(1) Product design (2) Planning and Scheduling (3) Production Operations (4) Cost Accounting

What are the three principal objectives of the cost accounting system?

(1) To provide information for planning, controlling, and evaluating the performance of production operations (2) To provide accurate cost data about products for use in pricing and product mix decisions (3) To collect and process the information used to calculate the inventory and cost of goods sold values that appear in the company's financial statement

Cost driver

- Anything that has a cause-and-effect relationship on costs

Production order

- Authorizes the manufacture of a specified quantity of a particular product - Lists operations to be performed, quantity to be produced, and location to be delivered. - Collects data about each of those activities

Materials requisition

- Authorizes the removal of the necessary quantity of raw materials from the storeroom to the factory location where they will be used.

What is the objective of the product design cycle?

- Create a product that meets customer requirements in terms of (1) quality, (2) durability, and (3) functionality - Simultaneously minimizing production costs

What is the objective of the planning and scheduling cycle?

- Develop a product plan efficient enough to meet existing orders and anticipated short-term demand - While minimizing inventories of both raw materials and finished goods

Move tickets

- For transfers of raw materials throughout the factory - Identify the parts being transferred, location to which they are transferred, and the time of transfer

Lean manufacturing

- JIT inventory - Minimize/eliminate inventories of raw materials, work in process, and finished goods. - Pull manufacturing; producing goods in response to customer demand

Throughput

- Number of good units produced in a given period of time Throughput = Productive capacity X Productive processing time X Yield

Bill of materials

- Output of the product design activity - Specifies part number, description, and quantity of each component used in a finished product

Operations list

- Output of the product design activity - Specifies the sequence of steps to follow in making the product, which equipment to use, and how long each step should take

Job-time ticket

- Paper document to collect data about labor activity - Records the amount of time a worker spent on each specific job tasks

In which activity are most of the product costs determined?

- Product Design

Who is responsible for maintaining raw materials inventory or finished goods?

Inventory stores department

Activity-based costing

A cost system designed to trace costs to the activities that create them

Process costing

A cost system that assigns costs to each process, or work center, in the production cycle, and then calculates the average cost for all units produced - Used when similar goods or services are produced in mass quantities and discrete units can't be readily identified

Job-order costing

A cost system that assigns costs to specific production batches or jobs. - Used when the product or service being sold consists of discretely identifiable items

Who should have the responsibility to periodically count inventory on hand?

An employee without any custodial responsibility

Who is responsible for work-in-process inventories

Department/Factory supervisors

Yield

Good units / Total units