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Copyright © 2015 Pearson Education, Inc.

The Production CycleChapter 14

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Learning Objectives

• Descrie the !a"or usiness acti#ities and re$atedin%or!ation processing operations per%or!ed inthe production cyc$e.

• Identi%y !a"or threats in the production cyc$e ande#a$uate the ade&uacy o% #arious contro$procedures %or dea$ing 'ith those threats.

• E(p$ain ho' a co!pany)s cost accounting syste!

can he$p it achie#e its !anu%acturing goa$s.• Discuss the *ey decisions that !ust e !ade in

the production cyc$e and identi%y the in%or!ationre&uired to !a*e those decisions.

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Production Cycle Process

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ERP Production Design Overview

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Data Flow Diagram – Production Cycle

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Production Cycle Process

• Product Design ource docu!ents i$$ o% !ateria$s and operations

$ist

• P$anning and chedu$ing ource docu!ents /aster production schedu$e,

production order, and !ateria$s re&uisition

• Production perations• Cost ccounting

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Threats and Controls – Production Cycle

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Threats and Controls – Production Cycle


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! Product Design

"! Planning and #cheduling

Threats Controls

1. Poor product design

resu$ting in e(cess costs2. #er and under production

1 a. na$ysis o% costs arising %ro!

product design choices

. na$ysis o% 'arranty and

repair costs

2 a. Production p$anning syste!s

. e#ie' and appro#eproduction orders and

schedu$es

c. estrict access to orders and

schedu$es

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$! Production O%erationsThreats Controls

1. In#entory the%t

2. 7i(ed asset the%t

+. Poor per%or!ance

4. uopti!a$ in#est!ents in%i(ed assets

5. 8oss o% in#entory or %i(edassets due to %ire or disasters

. Disruption o% operations

1 a. estrict physica$ access

. Docu!ent !o#e!ent o%

in#entory

c. egregation o% custody duties %ro! authori9ation and

recording

2 a. estrict access to %i(ed assets

. :eep detai$ed records o% %i(ed

assets inc$uding disposa$s

+ a. Per%or!ance reporting

4 a. o$icit co!petiti#e ids

5 a. Insurance and physica$

sa%eguards

a. ;ac*up and disaster reco#ery

p$ans 14-10


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&! Cost 'ccounting

Threats Controls

1. Inaccurate cost data

2. Inappropriate a$$ocation o%o#erhead costs

+. /is$eading reports

1 a. ource data auto!ation . Data processing integrity

contro$s

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Cost 'ccounting #ystems

• Pro#ide in%or!ation %or p$anning, contro$$ing,and e#a$uating the per%or!ance o% production

operations• Pro#ide accurate cost data aout products %or

use in pricing and product !i( decisions

• Co$$ect and process the in%or!ation used to

ca$cu$ate the in#entory and cost o% goods so$d #a$ues that appear in organi9ation)s %inancia$s

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(ey Terms

• Production cyc$e

• ;i$$ o% !ateria$s

• perations $ist• /anu%acturing resource

p$anning =/P-II>

• 8ean !anu%acturing

• /aster production schedu$e

=/P>• Production order

• /ateria$s re&uisition

• /o#e tic*et

• Co!puter-integrated!anu%acturing =CI/>

• e&uest %or proposa$ =7P>• ?o-order costing

• Process costing

• ?o-ti!e tic*et

• /anu%acturing o#erhead

• cti#ity-ased costing• Cost dri#er

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))) *uestions )))

• @hat are the =a> account a$ances and =>&uantities %or your ite!s in the + In#entory

ccounts a' /ateria$s =20000000 @ood :itAAA>,

, and

7inished Boods =20010000 oc*erAAA>

• @hat is the ;a$ance o% the BI account=+1000000>

• @hat is the ;a$ance o% your P account

=+0000AAA> 14

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