The Production Cycle Chapter 14 Copyright © 2015 Pearson Education, Inc 14-1 Learning Objectives • Describe the major business activities and related information processing operations performed in the production cycle • Identify major threats in the production cycle and evaluate the adequacy of various control procedures for dealing with those threats • Explain how a company’s cost accounting system can help it achieve its manufacturing goals • Discuss the key decisions that must be made in the production cycle and identify the information required to make those decisions Copyright © 2015 Pearson Education, Inc 14-2 Production Cycle Process • Product Design ▫ Source documents: bill of materials and operations list • Planning and Scheduling ▫ Source documents: Master production schedule, production order, and materials requisition • Production Operations • Cost Accounting Copyright © 2015 Pearson Education, Inc 14-3 Production Cycle Process Copyright © 2015 Pearson Education, Inc 14-4 Product Design Planning and Scheduling Threats Poor product design resulting in excess costs Over and under production Controls Copyright © 2015 Pearson Education, Inc a Analysis of costs arising from product design choices b Analysis of warranty and repair costs a Production planning systems b Review and approve production orders and schedules c Restrict access to orders and schedules Production Operations Threats Controls a Restrict physical access b Document movement of inventory c Segregation of custody duties from authorization and recording a Restrict access to fixed assets b Keep detailed records of fixed assets including disposals a Performance reporting a Solicit competitive bids a Insurance and physical safeguards a Backup and disaster recovery plans Inventory theft Fixed asset theft Poor performance Suboptimal investments in fixed assets Loss of inventory or fixed assets due to fire or disasters Disruption of operations Copyright © 2015 Pearson Education, Inc 4 Cost Accounting Threats Controls Inaccurate cost data Inappropriate allocation of overhead costs Misleading reports Copyright © 2015 Pearson Education, Inc a Source data automation b Data processing integrity controls a Time-driven activity-based costing a Performance metrics Cost Accounting Systems • Provide information for planning, controlling, and evaluating the performance of production operations • Provide accurate cost data about products for use in pricing and product mix decisions • Collect and process the information used to calculate the inventory and cost of goods sold values that appear in organization’s financials Copyright © 2015 Pearson Education, Inc 14-8 Key Terms • • • • • • • • • Production cycle Bill of materials Operations list Manufacturing resource planning (MRP-II) Lean manufacturing Master production schedule (MPS) Production order Materials requisition Move ticket Copyright © 2015 Pearson Education, Inc • Computer-integrated manufacturing (CIM) • Request for proposal (RFP) • Job-order costing • Process costing • Job-time ticket • Manufacturing overhead • Activity-based costing • Cost driver • Throughput ... product design choices b Analysis of warranty and repair costs a Production planning systems b Review and approve production orders and schedules c Restrict access to orders and schedules Production... pricing and product mix decisions • Collect and process the information used to calculate the inventory and cost of goods sold values that appear in organization’s financials Copyright © 2015 Pearson... Time-driven activity-based costing a Performance metrics Cost Accounting Systems • Provide information for planning, controlling, and evaluating the performance of production operations • Provide