Ch. 7

Move Ticket

Document that records work done in each work center and authorizes the movement of the job or batch from one work center to the next

Conversion Cycle

transforms (converts) input resources, such as raw materials, labor, and overhead, into finished products or services for sale *consists of both physical and information activities related to manufacturing*

Work Centers and Storekeeping

-Work Center: section of a production facility where all tasks associated with a particular process are performed -Store keeping: responsible for safeguarding and keeping the materials and supplies in proper place until required in production

What functions should be separated to segregate record keeping from asset custody?

1. Inventory control maintains accounting records for RM and FG inventories--this activity is kept SEPARATE from the materials storeroom and from the FG warehouse functions which have custody of these assets 2. The cost accounting function accounts for WIP ad should be SEPARATE from the work centers in the production process

What documents are needed for COST ACCOUNTING clerks to update the WIP accounts with standard charges?

1. Inventory control sends copies of : materials requisitions, excess materials requisitions, and materials returns 2. the various work centers send job tickets and completed move tickets *these documents along with STANDARDS provided by the standard cost file, enable cost accounting to update the affected WIP accounts with the standard charges for direct labor, material, and manufacturing overhead

Production planning and control

1. Materials and operations requirements -RM requirements for a batch of any given product is the difference between what is NEEDED and what is AVAILABLE in the RM inventory -Operations requirements for the batch involve the assembly and/ or manufacturing activities that will be applied to the product 2. Production scheduling schedule is influenced by time constraints, batch size, and specifications derived from BOM and route sheets

What activities are involved in the batch processing system?

1. Production planning and control -Materials and operations requirements -production scheduling 2. Work centers and storekeeping 3. Inventory control

What are the primary determinants from both materials and operations requirements?

1. The RAW MATERIALS requirements for a batch of any given product is the difference between what is NEEDED and what is AVAILABLE in the RM inventory--information comes from analysis of inventory on hand, the sales forecast, engineering specifications (if any), and the BOM -OPERATIONS requirements for the batch involve the assembly and/ or manufacturing activities that will be applied to the product--determined by assessing route sheet specifications

Give an example for each of the following control activities in the conversion cycle: transaction authorization, segregation of duties, and access control.

1. Transaction authorization--work orders, move tickets, and materials requisitions 2. Segregation of duties-- (1) inventory control separate from RM and FG inventory custody (2) cost accounting separate from work centers (3) GL separate from other accounting functions 3. Access control-- limit physical access to FG, RM stocks, and production processes; use formal procedures and documents to release materials into production

What documents trigger and support batch processing systems?

Can be triggered by either individual SALES ORDERS from the revenue cycle or by a SALES FORECAST provided by the marketing system Supported by: -production schedule -bill of materials (BOM) -route sheet -work order -move ticket -materials requisition

value stream

Includes all the steps in the process that are essential to producing a product

What is meant by the statement "inventories camouflage production problems and can cause over production?" What is wrong with over production if you already own the raw material?

Inventories camouflage production problems: -bottlnecks and capacity imbalances in the manufacturing process cause WIP inventory to bulid up at the "chocke points"--inventories can also build up when customer orders and production are out of sync Willingness to maintain inventories can precipitate overproduction: -because of setup cost constratints, firms tend to overproduce inventories in large batches to absorb the allocated costs and create the image of improved efficiency--the thrue cost is hidden in the excess inventory

Inventory Control

Three main activities: 1. provides planning and control status reports on finished good and raw materials inventory 2. continually involved in updating the raw material inventory records from materials requisitions, excess materials requisitions, and materials return tickets 3. upon receipt of the last work order from the last work center, inventory control records the completed production by updating the finished goods inventory *objective is to MINIMIZE total inventory cost while ensuring that adequate inventories exist to meet current demand*

What are the objectives of inventory control in the production process?

To minimize total inventory cost while ensuring that adequate inventories exist to meet current demand

What document triggers the beginning of the COST ACCOUNTING process for a given production run?

begins when the production planning and control department sends a copy of the original work order to the cost accounting department

computer-integrated manufacturing (CIM)

completely automated environment

continuous processing

creates a homogeneous product through a continuous series of standard procedures

Activities

describe the work being performed ex) preparing a purchase order

Materials Requisition

document that authorizes the storekeeper to release materials to individuals or work centers in the production process (usually only specifies STANDARD QUANTITIES)

Work Order

document that draws from bills of materials and route sheets to specify the materials and production for each batch -together with move tickets initiate the manufacturing process in the production departments

Route Sheet

document that shows the production path a particular batch of products follows during manufacturing -conceptually similar to BOM, but the route sheet specifies the SEQUENCE of operations and the standard time allocated to each task

Bill of Materials (BOM)

document that specifies the types and quantities of the raw materials and subassemblies used in producing a single unit of finished product ram material requirements for entire batch= BOM * number of items in the batch

Islands of technology

environment where modern automation exists in the form of islands that stand alone within the traditional setting

Differentiate between essential and nonessential activities

essential activities add value while nonessential activities do not *nonessential activities should be eliminated from the production process*

Make-to-order Processing

fabrication of discrete products in accordance with customer specifications (*initiated by sales orders rather than by depleted inventory levels)

Production Schedule

formal plan and authorization to begin production -describes specific products to be made, the quantities to be produced in each batch, and the manufacturing timetable for starting and completing production

What are the primary goals of lean manufacturing?

improved efficiency and effectiveness in EVERY AREA, including product design, supplier interaction, factory operations, employee management, and customer relations

What type of management reports are prepared by the cost accounting system?

labor variances materials variances manufacturing overhead variances

Batch processing

produces discrete groups (batches) of products, each item in the batch is similar and requires the same raw materials and operations

Cost Objects

reasons for performing activities ex) preparing a sales order (activity) because the customer (cost object) wants to place and order

What document signals the completion of the production process?

the receipt of the LAST MOVE TICKET for a particular batch signals the completion of the productions process and the transfer of products from WIP to FG inventory

computer-aided manufacturing (CAM)

use of computers in factory automation

computer-aided design (CAD)

use of computers to design products to be manufactured