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9 – 1 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
The ProductionThe Production
Business Business
ProcessProcessChapter 9Chapter 9
9 – 2 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Learning Objective 1Learning Objective 1
Describe transaction cycleDescribe transaction cycle
controls that are used in thecontrols that are used in the
production business process.production business process.
9 – 3 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Transaction Flow in aTransaction Flow in aProduction Control ApplicationProduction Control Application
ProductionProductionControlControl
ProductionProductionDepartmentsDepartments
InventoryInventoryControlControl
CostCostAccountingAccounting
GeneralGeneralLedgerLedger
FactorFactoravailabilityavailability
reportreport
FactorFactoravailabilityavailability
reportreport
InventoryInventorystatusstatus
reportsreports
InventoryInventorystatusstatus
reportsreports
Raw materialsRaw materialsFinished goodsFinished goods
9 – 4 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Transaction Flow in aTransaction Flow in aProduction Control ApplicationProduction Control Application
ProductionProductionorderorder
2233
ProductionProductionorderorder
22
ProductionProductionorderorder
11
Post to WIPPost to WIPrecordsrecordsJournalJournal
vouchervoucherJournalJournalvouchervoucher
MaterialsMaterialsplaced inplaced in
productionproduction
ProductionProductionControlControl
ProductionProductionDepartmentsDepartments
InventoryInventoryControlControl
CostCostAccountingAccounting
GeneralGeneralLedgerLedger
11
NNCompletedCompletedproductionproduction
orderorder 22
Post toPost toinventoryinventoryrecordsrecords
9 – 5 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Transaction Flow in aTransaction Flow in aProduction Control ApplicationProduction Control Application
NN
ProductionProductionControlControl
ProductionProductionDepartmentsDepartments
InventoryInventoryControlControl
CostCostAccountingAccounting
GeneralGeneralLedgerLedger
MaterialMaterialrequisitionrequisition
2233
11
44
NN
3322
MaterialMaterialrequisitionrequisition
11 Attach toAttach tocompletedcompletedproductionproduction
orderorderMaterialMaterial
requisitionrequisition22
MaterialMaterialrequisitionrequisition
Post to WIPPost to WIPrecordsrecords
11
CompletedCompletedproductionproduction
orderorder 22
Post toPost toinventoryinventoryrecordsrecords
9 – 6 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Transaction Flow in aTransaction Flow in aProduction Control ApplicationProduction Control Application
ProductionProductionscheduleschedule
DDJob timeJob time
cardscards
Post to WIPPost to WIPrecordsrecords
Job timeJob timecardscards
JournalJournalvouchervoucher
JournalJournalvouchervoucher
ConversionConversioncostscosts
ProductionProductionControlControl
ProductionProductionDepartmentsDepartments
InventoryInventoryControlControl
CostCostAccountingAccounting
GeneralGeneralLedgerLedger
1122
ProductionProductionscheduleschedule
11
9 – 7 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Transaction Flow in aTransaction Flow in aProduction Control ApplicationProduction Control Application
ProductionProductionstatusstatus
ProductionProductionstatusstatus
JournalJournalvouchervoucher
JournalJournalvouchervoucher
Cost of goodsCost of goodsmanufacturedmanufactured
SummarizeSummarizeproductionproduction
ProductionProductionControlControl
ProductionProductionDepartmentsDepartments
InventoryInventoryControlControl
CostCostAccountingAccounting
GeneralGeneralLedgerLedger
CompletedCompletedproductionproductioncost reportcost report
To managementTo management
CompletedCompletedproductionproduction
orderorder
CompletedCompletedproductionproduction
orderorder22 22
9 – 8 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Cost AccountingCost Accounting
The cost accounting department is responsible The cost accounting department is responsible for maintaining a file of WIP records.for maintaining a file of WIP records.
9 – 9 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Inventory ControlInventory Control
Inventory useInventory use
Inventory balancesInventory balances
Minimum and maximum levels of stockMinimum and maximum levels of stock
Reorder pointReorder point
Economic order quantity (EOQ)Economic order quantity (EOQ)
9 – 10 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Inventory ControlInventory Control
EOQEOQ ==2 2 ×× R R ×× S S
P P ×× I I
R = requirements for the item this periodR = requirements for the item this period
S = purchasing cost per orderS = purchasing cost per order
P = unit costP = unit cost
I = inventory carrying cost per period.I = inventory carrying cost per period.
9 – 11 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Inventory ControlInventory Control
Reorder pointReorder point= Lead time = Lead time × × Average inventory usage rateAverage inventory usage rate
9 – 12 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Just-in-Time (JIT) ProductionJust-in-Time (JIT) Production
Just-in-timeJust-in-time production is a term used to production is a term used todescribe a production system in whichdescribe a production system in which
parts are produced only as they areparts are produced only as they arerequired in subsequent operations.required in subsequent operations.
9 – 13 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Just-in-Time (JIT) ProductionJust-in-Time (JIT) Production
FinishedFinishedgoodsgoods
inventoryinventoryCustomerCustomerCustomerCustomer
VendorVendorVendorVendorRawRaw
materialsmaterialsinventoryinventory
OperationOperation11
OperationOperation11
Work-in-Work-in-processprocess
inventoryinventory
OperationOperation22
OperationOperation22
9 – 14 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Learning Objective 2Learning Objective 2
Describe the major featuresDescribe the major features
of a property accountingof a property accounting
business process.business process.
9 – 15 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Property AccountingProperty AccountingApplication SystemApplication System
PropertyPropertytransactionstransactions
InvestmentsInvestmentsandand
fixed assetsfixed assets
Record inRecord inpropertypropertyledgersledgers
PeriodicPeriodiccomparisoncomparison
PropertyPropertyledgersledgers
ReconciliationReconciliationof discrepanciesof discrepancies
PeriodicPeriodicprocessingprocessing
DepreciationDepreciationcalculationscalculations
OtherOthermanagementmanagement
reportsreports
Insurance andInsurance andreplacementreplacementcosts reportscosts reports
9 – 16 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Fixed Assets and InvestmentsFixed Assets and Investments
Fixed assetsFixed assets InvestmentsInvestments
9 – 17 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Fixed Assets orFixed Assets orInvestment AccountingInvestment Accounting
Maintain adequate recordsMaintain adequate records
Provide for appropriate depreciationProvide for appropriate depreciationand/or amortization.and/or amortization.
Provide for reevaluation for insuranceProvide for reevaluation for insuranceand replacement cost purposes.and replacement cost purposes.
Provide management with reports.Provide management with reports.
9 – 18 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Fixed Assets orFixed Assets orInvestment AccountingInvestment Accounting
9 – 19 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Learning Objective 3Learning Objective 3
Identify and describe keyIdentify and describe key
components of computercomponents of computer
integrated manufacturingintegrated manufacturing
(CIM) systems.(CIM) systems.
9 – 20 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Quick-ResponseQuick-ResponseManufacturing SystemsManufacturing Systems
PhysicalPhysicalmanufacturing manufacturing
systemsystem
(MRP II)(MRP II)systemsystem
CIMCIMAdvanced Advanced
technologiestechnologies
Quick-response manufacturing systemQuick-response manufacturing system
9 – 21 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Quick-ResponseQuick-ResponseManufacturing SystemsManufacturing Systems
Quick-responseQuick-responsemanufacturingmanufacturing
systemsystem
Quick-responseQuick-responsemanufacturingmanufacturing
systemsystem
Computer IntegratedComputer IntegratedManufacturing System (CIM)Manufacturing System (CIM)
PhysicalPhysicalmanufacturingmanufacturing
systemsystem
PhysicalPhysicalmanufacturingmanufacturing
systemsystem
ManufacturingManufacturingresource planningresource planning
(MRP II)(MRP II)
ManufacturingManufacturingresource planningresource planning
(MRP II)(MRP II)
CADDCADDCADDCADD CAMCAMCAMCAM MRPMRPMRPMRP
9 – 22 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Quick-ResponseQuick-ResponseManufacturing SystemsManufacturing Systems
DistributedDistributeddatabasesdatabasesDistributedDistributeddatabasesdatabases
DistributedDistributeddatabasesdatabasesDistributedDistributeddatabasesdatabases
Advanced Integration TechnologiesAdvanced Integration Technologies
Computer-basedComputer-basedinformationinformation
systemsystem
Computer-basedComputer-basedinformationinformation
systemsystem
EDIEDIEDIEDIAutomaticAutomatic
identificationidentificationAutomaticAutomatic
identificationidentification
9 – 23 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
The Physical Manufacturing The Physical Manufacturing SystemSystem
Two subsystems directly support theTwo subsystems directly support thephysical manufacturing systemphysical manufacturing system..
CADD (computer-aided design and drafting)CADD (computer-aided design and drafting)
CAM (computer-aided manufacturing)CAM (computer-aided manufacturing)
9 – 24 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Computer-Aided DesignComputer-Aided Designand Drafting (CADD)and Drafting (CADD)
Solids modelingSolids modeling
Finite element analysisFinite element analysis
Automated draftingAutomated drafting
9 – 25 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Computer-AidedComputer-AidedManufacturing (CAM)Manufacturing (CAM)
Industrial robotIndustrial robot
Statistical process controlStatistical process control
Flexible manufacturing systemsFlexible manufacturing systems
9 – 26 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
The Manufacturing Resource The Manufacturing Resource Planning (MRP II) SystemPlanning (MRP II) System
The MRP II system comprises theThe MRP II system comprises thematerials requirements planningmaterials requirements planning
(MRP)(MRP) system system and the related systemsand the related systemsfor sales, billing, and purchasing.for sales, billing, and purchasing.
9 – 27 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Materials RequirementsMaterials RequirementsPlanning (MRP)Planning (MRP)
MRPMRPMRPMRP
CostCostaccountingaccounting
CostCostaccountingaccounting
ProductionProductionplanningplanningProductionProductionplanningplanning
ProductionProductionschedulingschedulingProductionProductionschedulingscheduling
ReportingReportingReportingReporting
9 – 28 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Advanced Integration Advanced Integration TechnologiesTechnologies
9 – 29 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Learning Objective 4Learning Objective 4
Depict the flow of processingDepict the flow of processing
necessary to supportnecessary to support
Manufacturing ResourceManufacturing Resource
Planning (MRP II) systems.Planning (MRP II) systems.
9 – 30 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Production PlanningProduction Planning
Production planningProduction planning involves the involves thedetermination of which productsdetermination of which products
to produce and theto produce and the scheduling schedulingof production to make optimalof production to make optimaluse of production resources.use of production resources.
9 – 31 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Production PlanningProduction Planning
Demand for a productDemand for a product
Production requirementsProduction requirements
Production resources availableProduction resources available
9 – 32 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Production PlanningProduction Planning
ProductionProductionplanningplanningProductionProductionplanningplanning
Bill ofBill ofmaterialsmaterials
MasterMasteroperations listoperations list
MarketingMarketingMarketingMarketing 11
InventoryInventorycontrolcontrol
InventoryInventorycontrolcontrol
22
33 ProductionProductiondepartmentsdepartmentsProductionProductiondepartmentsdepartments
44
55
11 Sales forecast Sales forecast22 Finished goods status Finished goods status33 Raw materials status Raw materials status44 Factor availability report Factor availability report55 Production schedule Production schedule
9 – 33 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Production PlanningProduction Planning
ProductionProductionplanningplanning
program(s)program(s)
MasterMasteroperationsoperations
filefile
ProductionProductionstatusstatus
filefile
Bill-of-Bill-of-materialsmaterials
filefile
MasterMasterproductionproduction
planplan
9 – 34 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Production PlanningProduction Planning
UpdatedUpdatedproductionproduction
statusstatusfilefile
ProductionProductionordersorders
MaterialMaterialrequisitionsrequisitions RoutingsRoutings
9 – 35 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Production SchedulingProduction Scheduling
ProductionProductionstatusstatusupdateupdate
ProductionProductionstatusstatus
filefile
RoutingRoutingfilefile
SummarySummaryreportreport
UpdatedUpdatedproductionproduction
statusstatusfilefile
ProductionProductionloadingloading
filefile
9 – 36 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Production SchedulingProduction Scheduling
ProductionProductionschedulingschedulingprogramprogram
SummarySummaryreportreport
ProductionProductionschedulesschedules
ProductionProductionloadingloading
filefile
9 – 37 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Production-Loading FileProduction-Loading File
This is the major input to theThis is the major input to theproduction-scheduling application.production-scheduling application.
9 – 38 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Cost AccountingCost Accounting
Cost accounting program(s)Cost accounting program(s)
ProductionProductionstatus filestatus file
ProductionProductiondata filedata file
• MaterialMaterial requisitionrequisition datadata• RTG dataRTG data
SummarySummaryreportreport
UpdatedUpdatedproductionproductionstatus filestatus file
CompletedCompletedproductionproductionorder fileorder file
ResourceResourceusageusage
filefile
9 – 39 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
ReportingReporting
InventoryInventoryupdateupdateInventoryInventory
filefile
CompletedCompletedproductionproductionorder fileorder file
Inventory ProcessingInventory Processing
UpdatedUpdatedinventoryinventory
filefile
Finished goodsFinished goodsstock statusstock status
reportreport
CompletedCompletedproductionproductioncost reportcost report
SummarySummaryreportreport
9 – 40 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
ReportingReporting
ResourceResourceusageusage
filefile
ReportReportgeneratorgenerator
ResourceResourceusageusage
reportsreports
Resource Usage ReportingResource Usage Reporting
9 – 41 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Learning Objective 5Learning Objective 5
Describe why activity-basedDescribe why activity-based
costing is particularlycosting is particularly
relevant to CIM systems.relevant to CIM systems.
9 – 42 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Activity-Based CostingActivity-Based Costing
Traditional cost accounting techniquesTraditional cost accounting techniquesmay be inadequate in a may be inadequate in a computercomputer
integrated manufacturingintegrated manufacturing environment. environment.
Because CIM reduces directBecause CIM reduces directlabor and increases overhead.labor and increases overhead.
Variable costs decreaseVariable costs decreaseand fixed costs increase.and fixed costs increase.
9 – 43 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Activity-Based CostingActivity-Based Costing
Activity-based costing (ABC) calculatesActivity-based costing (ABC) calculatesseveral overhead ratesseveral overhead rates, one for, one for
each manufacturing activity.each manufacturing activity.
9 – 44 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Activity-Based CostingActivity-Based Costing
What are some examples of activities?What are some examples of activities?
Machine centersMachine centers Material handlingMaterial handling
Inspection stationsInspection stations
A single department may containA single department may containseveral different activities.several different activities.
Manual assemblyManual assembly
9 – 45 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Major Processing Modules in Major Processing Modules in MRP IIMRP II
MRP IIMRP IIMRP IIMRP II
Bill-of-materialsBill-of-materialsmodulemodule
Bill-of-materialsBill-of-materialsmodulemodule
Routings fileRoutings filemodulemodule
Routings fileRoutings filemodulemodule
Inventory controlInventory controlmodulemodule
Inventory controlInventory controlmodulemodule
ProductionProductionactivity controlactivity control
modulemodule
ProductionProductionactivity controlactivity control
modulemodule
Master productionMaster productionschedulingscheduling
modulemodule
Master productionMaster productionschedulingscheduling
modulemodule
Production orderProduction ordermodulemodule
Production orderProduction ordermodulemodule
9 – 46 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Implementing JIT in aImplementing JIT in aMRP II/CIM EnvironmentMRP II/CIM Environment
Less emphasis might be placedLess emphasis might be placedon a complete MRP II system.on a complete MRP II system.
9 – 47 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Special Internal Control Special Internal Control ConsiderationsConsiderations
Transactions may be processed withoutTransactions may be processed withouthuman intervention or approval.human intervention or approval.
This eliminates conventional controlsThis eliminates conventional controlsassociated with separationassociated with separationof duties in transactions.of duties in transactions.
9 – 48 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Special Internal Control Special Internal Control ConsiderationsConsiderations
Extensive controls and audit trails mayExtensive controls and audit trails maybe implemented in quick-responsebe implemented in quick-response
manufacturing systems.manufacturing systems.
These features must be included withinThese features must be included withinthe design and development of the system.the design and development of the system.
Systems development is critical inSystems development is critical inquick-response manufacturing systems.quick-response manufacturing systems.
9 – 49 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
End of Chapter End of Chapter 99
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