Production Cycle Kevin Ma Steven Radcliff Jie Chen Ernesto Pena Bryan Vien PRODUCTION FLOWCHART: PAGE 3

Narrative The company issues reports at the beginning of the period to check the status of raw materials, finished goods, and the capacity of the production lines. The production schedules are sent to the production department and the material requisitions were approved by the inventory control department; the production takes place. In the meantime, the production schedule is made. After the production is completed, a production status report is created and is sent to the production control department. The completed units are sent to the inventory control department.

Narrative The cost accounting department receives purchase orders, job time cards, and material requisition forms and processes the financial data related to the job order. The journal vouchers are used to update the general ledger to post adjustments. The documents are sent to the management.

Production Flowchart

Step 1 Prior to any production, Inventory Control Department and Production Department each performs a routine procedure. Inventory Status Report Factor Availability Report Production Control Production Department Inventory Control

Step 1 Inventory Status Report Factor Availability Report Production Control Production Department Inventory Control Inventory Control Department performs a status check on the amount of raw materials and finished goods and then sends the report to Production Control Department. This is to inform the Production Control Department the amount of available raw materials can go into production, and the amount of finished units can be used to fill customers orders.

Step 1 Inventory Status Report Factor Availability Report Production Control Production Department Inventory Control Production Department checks the production capacity and issues a Factor Availability Report and sends it to Production Control Department. Factor Availability Report – states the available production capacity. It contains how much resource such as labor, land, capital etc are available. With these information, the Production Control Department can make plans to schedule productions, so all orders can be met in time.

Production Flowchart

Production Control Department issues production orders which authorize the unit production. a.A copy of the P.O. is sent to Cost Accounting Department. b.Another copy of the P.O. is sent to the Production Dept. which authorizes them to produce the order. c.The last copy of the P.O. is filed numerically in Production Control Department. Step Production Control Production Department Cost Accounting Production Order 1 Production Order 2 Production Order 1 N Completed Production Order

Production Flowchart

Production Control issues material requisition. a.Production Control send 3 copies of the Material Requisition to inventory control. b.The 4 th copy of the Material Requisition is filed numerically in Production Control. Step Material Req. 1 N 3 2 Production Control Production Department Inventory Control Cost Accounting

Production Flowchart

Inventory Control receives 3 copies of the Material Requisition from Production Control. a.1 copy goes to Cost Accounting. b.Another goes to the Production Dept. along with the requested amount of raw materials. c.The last copy is filed numerically in Inventory Control to keep track of the inflows and outflows of raw materials Step Material Req. 1 Material Req. 2 N Production Control Production Department Inventory Control Cost Accounting Material Req. 1

Production Flowchart

Production Control sends a copy of the Production Schedule to the Production Dept. This informs the Production Department the scheduled date of completion of that particular order. The other copy of the Production Schedule is filed in Production Control by date. Step 5 2 Production Schedule 1 D Production Control Production Department Production Schedule 1

Production Flowchart

Inventory Control creates a Journal Voucher which contains information about the amount of material used in production. And this journal voucher is used to update the general ledger. Journal Voucher updates general ledger. Step 6 Journal Voucher Inventory Control General Ledger Journal Voucher

Production Flowchart

This is the actual production process. As the Production Department receives the production order, which is the approval of production from step (2), and the raw material required for production from step (4), the production takes place. The material requisition form is attached to the production order form, and along with the finished production, they are sent to the Inventory Control Department. Step 7 Production Order 2 Production Department Inventory Control Completed Production Order 2 Production Order 2

Production Flowchart

1.Inventory Control receives the Completed Production Order along with the Material Requisition from the Production Dept. (7) a. They post to the inventory records. Quantityproduced Quantity of material used b. It is sent to Cost Accounting i. To summarize production ii. Record unit cost/total cost/quantity etc. Step 8 Completed Production Order 2 Inventory control Cost Accounting Completed Production Order 2

Production Flowchart

1. The Production Dept. sends the Job Time Cards to Cost Accounting to calculate Labor Costs. a.Cost Accounting posts to WIP records. b.Direct Labor Cost c.Indirect Labor Cost Step 9 Job Time Card Production Department Cost Accounting Job Time Card

Production Flowchart

Step 10 Production Status Production Control Production Department Production Status Production Control receives a Production Status Report from the Production Dept.

Production Flowchart

Step 11 Production Order 1 Cost Accounting Post to WIP Records Cost Accounting posts the Production Order to WIP records. The Production order was received from Inventory Control earlier in step (2).

Production Flowchart

Cost Accounting posts the Material Requisition to WIP records. The Material Requisition was received from Inventory Control in step (4). Step 12 Material Req. 1 Cost Accounting Post to WIP Records

Production Flowchart

1.Cost Accounting updates the General Ledger by using a Journal Voucher to record Conversion Costs = Direct Labor + Manufacturing Cost Overhead Cost Step 13 Journal Voucher Cost Accounting General Ledger Journal Voucher

Production Flowchart

Step 14 1.Cost Accounting updates the General Ledger by using the Journal Voucher to record the Cost of Goods Manufactured. Direct Material used +Direct Manufacturing Labor +Manufacturing Overhead Costs +Work in Process (beginning) - Work in Process (ending) =Cost of Goods Manufactured Journal Voucher Cost Accounting General Ledger Journal Voucher

Production Flowchart

Step 15 Completed Production Order 2 Cost Accounting General Ledger M M Management Cost Accounting sends the Completed Production Order to Management.

Production Flowchart

Threats and Controls Threat – lack of management control during the process could cause under or over production Control – proper approval of production orders by involving management earlier on in the process(2) Control – periodic status reports to management

Threats and Controls (cont) Threat – inaccurate inventory control, threat is this system only shows when raw material is being used, but it does not show when/how many completed units the company has on hand Control – inventory control department should update the general ledger by sending a journal voucher after production has been completed Control – use RFID technology to keep track of inventory Control – do a periodic physical inventory counts Control – move tickets should be used to document subsequent movement of inventory.

Threats and Controls (cont) Threat – employees cheating on how many hours they actually worked Control – computerized time card system that automatically records and tightened management control procedures Control – install camera’s to monitor that employees are where they say they were Control – have manager responsible for time card accuracy from their specific department

Threats and Controls (cont) Threat – time conflicts might occur between different production lines without a proper production schedule when planning production orders. Control – make the production schedule right after the production order.

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