PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–1 This is the prescribed textbook for your course. Available NOW at your campus bookstore!

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–2 Factory management techniques Chapter 18

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–3 Control of inventory levels 1.Economic order quantity (EOQ) 2.Just-in-time (JIT) purchasing and production 3.Materials resource planning

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–4 Cost category considerations 1.Ordering costs 2.Carrying (holding) costs 3.Stockout (shortage) costs

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–5 Economic order quantity Methods to determine the optimum quantity for each order –Tabular analysis –Graphical presentation –Equation method

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–6 Establish the optimum size of each production run –Calculate the cost of each production set-up –Calculate annual relevant holding cost per unit of average inventory –Calculate the economic production run Reorder point, lead time and safety stock EOQ and production

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–7 EOQ assumptions Demand is known and does not change from one period to the next Lead time is known and does not change from one order to the next Order is received in one batch at one point in time rather than several batches arriving at different times

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–8 Quantity discounts are ignored Only relevant costs are the variable costs of ordering and holding invoices Stockouts or shortages are avoided if orders are placed at the right time EOQ assumptions (cont.)

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–9 Just-in-time inventory management A demand-pull approach Benefits –Reduced number of suppliers –Long-term contracts with suppliers –Delivery of materials is made immediately they are required for production, usually in small lot sizes –Checking for quantity and quality of materials is minimised –Payments to suppliers are made for batches of deliveries rather than for each delivery

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–10 Just-in-time strategies 1.Kanban 2.Even production rate 3.Standardisation 4.JIT purchasing 5.Set-up reduction 6.Preventative maintenance 7.Worker involvement 8.Multiskilled workers 9.Total quality management 10.Advanced manufacturing technology

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–11 Accounting for a JIT environment Backflush costing –Variation 1 –Variation 2

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–12 Materials requirements handling

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–13 Key components of MRP Master production schedule Bill of materials Reports on purchase orders outstanding and existing inventories Lead times for each item of material, parts and components

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–14 Quality control Company’s reputation Market share Product liability International implications Why improve quality?

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–15 Quality control (cont.) The Deming management philosophy –Fourteen principles of management –The seven deadly diseases The benefits of total quality management (TQM)

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–16 Total quality management in Australia Tubemakers of Australia Ltd. W. A. Deutscher Ramset (Australia)

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–17 Some processes that contribute to success for TQM Benchmaking Quality standards Total quality control Employee involvement Quality control circles

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller 18–18 World competitive manufacturing Flexible manufacturing system –Computer-aided design (CAD) –Computer-aided manufacture (CAM) –Computer numerically controlled (CNC) machines –Automated material-handling system (AMHS) –Robots –Computer-integrated manufacturing (CIM)