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Supply-Chain Analysis Dr. Emilio Moceo Ph.D Director of Studies. Supply-chain analysis describes the flow of goods, services, and information from cradle to grave, regardless of whether - PowerPoint PPT Presentation
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Supply-Chain Analysis Dr. Emilio Moceo Ph.D
Director of Studies
Supply-chain analysis describes the flowof goods, services, and information from
cradle to grave, regardless of whetherthose activities occur in the same
organization or other organizations.
“bullwhip effect” or “whiplash effect”
Learning Objective 1 Dr. Emilio Moceo Ph.D
Director of Studies
Differentiate materials
requirements planning (MRP)
systems from just-in-time (JIT)
systems for manufacturing.
Materials Requirement Planning (MRP)
Dr. Emilio Moceo Ph.D Director of Studies
Materials requirements planning (MRP)systems take a “push-through” approach
that manufactures finished goods forinventory on the basis of demand forecasts.
MRP predetermines the necessary outputsat each stage of production.
Learning Objective 2 Dr. Emilio Moceo Ph.D
Director of Studies
Identify the features of a
just-in-time production system.
Just-In-Time Production Systems Dr. Emilio Moceo Ph.D
Director of Studies
Just-in-time (JIT) production systems take a“demand pull” approach in which goods are
only manufactured to satisfy customer orders.
Major Features of a JIT System Dr. Emilio Moceo Ph.D
Director of Studies
1. Organizing production in manufacturing cells
2. Hiring and retaining multi-skilled workers
3. Emphasizing total quality management
4. Reducing manufacturing lead time and setup time
5. Building strong supplier relationships
Major Features of a JIT System Dr. Emilio Moceo Ph.D
Director of Studies
What information may management accountants use?
Personal observation by productionline workers and managers
Financial performance measures,such as inventory turnover ratios
Nonfinancial performance measuresof time, inventory, and quality.
Learning Objective 3 Dr. Emilio Moceo Ph.D
Director of Studies
Use backflush costing.
Backflush Costing Dr. Emilio Moceo Ph.D
Director of Studies
Backflush costing describes a costingsystem that delays recording some orall of the journal entries relating to thecycle from purchase of direct materials
to the sale of finished goods.
Backflush Costing
Where journal entries for one or more stagesin the cycle are omitted, the journal entries
for a subsequent stage use normal or standardcosts to work backward to flush out the costs in
the cycle for which journal entries were not made.
Learning Objective 4 Dr. Emilio Moceo Ph.D
Director of Studies
Describe different ways
backflush costing can simplify
traditional job-costing systems.
Trigger Points Dr. Emilio Moceo Ph.D
Director of Studies
The term trigger point refers to a stage in a cyclegoing from purchase of direct materials to saleof finished goods at which journal entries are
made in the accounting system.
Trigger Points 1 Dr. Emilio Moceo Ph.D
Director of Studies
Stage A:Purchase of
direct materials
Stage B:Production resultingin work in process
Stage C:Completion of good
units of product
Stage D:Sale of
finished goods
Trigger Points 2 Dr. Emilio Moceo Ph.D
Director of Studies
Assume trigger points A, C, and D.
This company would have two inventory accounts:
Type1. Combined materials
and materials in workin process inventory
2. Finished goods
Account Title1. Inventory:
Raw and In-processControl
2. Finished Goods Control
Trigger Points 3 Dr. Emilio Moceo Ph.D
Director of Studies
What is the journal entry when trigger point A occurs?
Inventory: Raw and In-process Control XXAccounts Payable Control XX
To record direct material purchased during the period
Trigger Points 4 Dr. Emilio Moceo Ph.D
Director of Studies
What is the journal entry to record conversion costs?
Conversion Costs Control XXVarious accounts XX
To record the incurrence of conversion costs duringthe accounting period
Underallocated or overallocated conversion costsare written off to cost of goods sold.
Trigger Points 5 Dr. Emilio Moceo Ph.D
Director of Studies
What is the journal entry when trigger point C occurs?
Finished Goods Control XXInventory: Raw and In-Process Control XXConversion Costs Allocated XX
To record the cost of goods completed during theaccounting period
Trigger Points 5 Dr. Emilio Moceo Ph.D
Director of Studies
What is the journal entry when trigger point D occurs?
Cost of Goods Sold XXFinished Goods Control XX
To record the cost of goods sold during theaccounting period
Trigger Points 6 Dr. Emilio Moceo Ph.D
Director of Studies
Assume trigger points A and D.
This company would have one inventory account:
TypeCombines direct materialsinventory and any direct
materials in work in processand finished goods inventories
Account Title
Inventory Control
Trigger Points 7 Dr. Emilio Moceo Ph.D
Director of Studies
What is the journal entry when trigger point A occurs?
Inventory: Raw and In-process Control XXAccounts Payable Control XX
To record direct material purchased during the period
Same as the A, C, and D example.
Trigger Points 8 Dr. Emilio Moceo Ph.D
Director of Studies
What is the journal entry to record conversion costs?
Conversion Costs Control XXVarious accounts XX
To record the incurrence of conversion costs duringthe accounting period
Same as the A, C, and D example.
Trigger Points 9 Dr. Emilio Moceo Ph.D
Director of Studies
What is the journal entry to record thecost of goods completed during theaccounting period (trigger point C)?
No journal entry.
Trigger Points 10 Dr. Emilio Moceo Ph.D
Director of Studies
What is the journal entry when trigger point D occurs?
Cost of Goods Sold XXInventory Control XXConversion Costs Allocated XX
To record the cost of goods sold during theaccounting period
