Professional Documents
Culture Documents
The Conversion Cycle
The Conversion Cycle
The Conversion Cycle
Production System
Involves the planning, scheduling, and control of the physical product through the manufacturing process
determining raw materials requirements authorizing the release of raw materials into production authorizing work to be conducted in the production process directing the movement of work through the various stages of production
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Production Methods
Continuous Processing creates a homogeneous product through a continuous series of standard procedures. Batch Processing produces discrete groups (batches) of products. Each item in the batch is similar. Make-to-Order Processing involves the fabrication of discrete products in accordance with customer specifications.
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Work Order - uses information from the BOM and route sheet to specify the exact materials and production processes for each batch
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Operations Requirements
Production Scheduling
work orders move tickets materials requisitions open work orders
work centers
Inventory Control status report of raw materials and finished goods Prod. Plan. and Control
journal voucher
General Ledger
demand is known and constant ordering lead time is known and constant total cost per year of placing orders decreases as the order quantities increase carrying costs of inventory increases as quantity of orders increases no quantity discounts
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Q=
2DS H
Where
Q = economic order quantity D = annual demand in units S = fixed cost of placing each order H = holding or carrying cost per unit per year
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EOQ
Reorder Point
Lead Time
Time (days)
Inventory Control
materials requisitions
Work Centers
job tickets completed move tickets
COST ACCOUNTANTS
STANDARDS
Update WIP accounts DL DM Mfg. OH. Compute Variances
Internal Controls
Authorizations
work orders reflect a legitimate need based upon sales forecast and the finished goods on hand move tickets (with authorized signature from each work station) authorize the movement of the batch through the various work centers materials requisitions authorize the warehouse to release materials to the work 19 centers
Internal Controls
Segregation of Duties
production planning and control department is separate from the work centers inventory control separate from materials storeroom and finished goods warehouse cost accounting function accounts for WIP and should be separate from the work centers in the production process
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Internal Controls
Supervision
supervisors in the work centers oversee the usage of raw materials in the production process to ensure that all released materials are used in production and waste is minimized employee time cards and job tickets are checked for accuracy
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Internal Controls
Access Control
Direct Access to Assets
storerooms, production work centers, and finished goods warehouses quantities in excess of standard amounts should require approval
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Internal Controls
Accounting Records
prenumbered documents work orders cost sheets move tickets job tickets material requisitions WIP and FGs files
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Internal Controls
Independent Verification
cost accounting reconciles material usage (material requisitions) and labor usage (job tickets) with prescribed standards, and variances are investigated GL dept. verifies the total movement from WIP to FG by reconciling journal vouchers from cost accounting and inventory subsidiary ledger summaries from inventory control internal and external auditors periodically verify the raw materials and FGs inventories on hand through a physical count
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Traditional
Islands of Technology
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Islands of Technology:
stand alone islands which employ computer numerical controlled (CNC) machines that can perform multiple operations with less human involvement less set up time needed
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automates all business functions along with full financial and managerial reporting capability
Inventories camouflage production problems. Willingness to maintain inventories can precipitate overproduction.
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Product Quality
is important because poor quality is expensive to the firm via scrap, reworking, scheduling delays, extra inventories to compensate for defective parts, warranty claims, and service is a basis on which world-class manufacturers compete can be improved though control point methods such as statistical process control
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Activity Management
Managers must understand which activities should be performed and how best to perform them.
Managers should deploy resources to activities that yield maximum benefits. Managers should seek to improve those factories most important to their customers.
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