The Flow of Information in The
Production Cycle
Analysis of Flowchart One By Group
One
What is the Production Cycle?
A recurring set of business activities and
related data processing operation
associated with the manufacture of
products
Context Diagram of Production Cycle
Customer
Orders
Revenue Cycle
Finished
Goods
Purchase
Requisitions
Expenditure Cycle
Raw
OverMaterials
head
Sales
Forecasts
Production Cycle
Cost of
goods
manufac
tured
General Ledger
Labor
Needs
Labor
Reports Costs HRM/Payroll Cycle
Management
Flowchart Symbols

Document

Input/Output: Journals/Ledgers

Computer Processing resulting
in change in data or information

Data stored on magnetic disks
Where to Start?
Is demand known?
Yes. Then MRP-11, where purchase order
is starting point
No. Then JIT, where sales order is the
starting point
Acquisition
s/ Payment
Process
Production
Process
Prodution
Order
Purchase
Order
Raw Materials
Inventory
Management
Standard
Costs
Production
Management
Receiving
Report
f
o
r
m
a
t
i
o
n
F
l
o
w
s
Sales/
Collections
Process
Sales
Order
Finished Goods
Inventory
Management
Cost
Standar
ds
i
n
Raw
Materials
Inventory
Cost
Accounting
Work In
Process
Inventory
Vendor
Invoice
Time Card /
Labor Ticket
Raw Material
Inventory
Status Report
Cost Activity or
Standard Cost
Variances
Report
Work In Process
Inventory Status
Report
Completion of
t
Production
h
e
P
r
o
d
u
c
t
i
o
Planning
Control
Process
Finished
Goods
Inventory
Finished
Goods
Inventory
Status Report
Cost of
Goods
Sold
Basic Activities
Product Design
Planning/scheduling
Production operations
Cost Accounting
Cost Accounting Information in The
Production Cycle
Accurate and timely accounting
information for decisions in:
Product Mix
Product Pricing
Resource Allocation and Planning
Cost Management
Cost Accounting
To make these decisions, more detailed
information is required about costs are
needed than those needed to prepare
financial statements. Cost accounting
provides information for planning,
controlling, and evaluating production
operations.
Purchase
Order
Raw Materials
Inventory
Management
Receiving
Report
Raw
Materials
Inventory
Vendor
Invoice
Raw Material
Inventory
Status Report
Report or Purchase Order
If there is enough material then create a
Raw Material Inventory Status Report
If there is not enough material create a
Purchase Order
Vendor Invoice
1. Receive vendor invoice
2. Revise the Raw Material Master
file to see if we have enough
material
Controls for Receiving Reports and
Vender Invoices
Segregation of duty
Segregation of terminals
 Access controls requiring electronic
signature
Inspection of goods
Verification of purchase order
Materials requisition
Cost Accounting: Standard Cost
Standard Cost Document: contains
budgeted rates for labor/oh, cost of raw
materials
Are estimates from previous data,
forecasted data, managerial creative input
Inputed into Standard Cost File
Cost Accounting: Actual Costs
Labor/OH costs from time cards/labor
tickets
Raw materials costs from raw
material/inventory files
Cost Accounting: On-line Processing
Appropriate accounts are debited/credited
updating WIP/Inventory files
Cost Activity Report/Cost Variance Report:
accounting for differences in
actual/estimated costs
Finished goods
Inventory
management
Production
Order
Production
Management
Work in
Process
Inventory
Completion
Of
Production
Finished
Goods
Inventory
Finished goods
Inventory
Management
MRP system is used
where demand is high and
constant to reduce levels of
inventory by scheduling
production
JIT Systems is not used
here because it helps
eliminate finished goods
inventory
Monitor vendor
performance for delivery
dependability and quality.

Finished
Finished
goods
Inventory
goods
management
Inventor
Production
Order
Product quality
Inventions
Correct errors
Reason for missing
products
Production
Management
Work in
Process
Inventory
Completion
Of
Production
Production Management
Finished
Goods
Inventory
Finished
Finished
goods
Inventory
goods
management
Inventor
Production
Order
Any defective
products are
scheduled for reproduction or
repaired
Production
Management
Work in
Process
Inventory
Completion
Of
Production
Finished goods inventory
management
Finished
Goods
Inventory
Work in Process Inventory
Work in Process: Tasks done after raw
materials process
Done after Cost Accounting or Production
Management Process
Production Process
Completion of
Production
Finished
Goods
Inventory
Sales/
Collection
Process
Completion of
Production
Cost of
Goods
Sold
•Use activity base costing
to capture performance
cost data by each cost
driver
•Analyze bill of materials
to identify which
components are in use
Finished
Goods
Inventory
Status
Report
Production Process
Sales/
Collection
Process
Finish Goods
Inventory
•Cost Accounting
Completion of
Production
Finished
Goods
Inventory
Cost of
Goods
Sold
•To collect and process
information
•Calculate the
inventory and cost of
goods sold
•For company’s
financial statement
Finished
Goods
Inventory
Status
Report
Production
Process
Controls for Finish Goods Inventory
•Threats and Controls
Finished
Goods
Inventory
•Recording and posting error resulting in
inaccurate cost data
•Data entry edit controls; use of bar-code
scanning; reconciliation of recorded amounts
with periodic physical counts
•Lost of Data
•Back up and disaster recovery planning
•Poor Performance
•Improved and timelier reporting
Production Process
Completion of
Production
Finished
Goods
Inventory
Finished
Goods
Inventory
Status
Report
Sales/
Collection
Process
Finished Goods
Inventory to Finish
Goods Inventory
Status Report
Cost of
Goods
Sold
•The batch total is
retrieved in the Finish
Goods Inventory to
produce a Finish Goods
Inventory Status Report
Production Process
Completion of
Production
Finished
Goods
Inventory
Sales/
Collection
Process
Finished Goods
Inventory to Cost of
Goods Sold Journal
Entries
Cost of
Goods
Sold
•The batch total from the
Finish Goods Inventory is
also sent to the Cost of
Goods Sold
•Debit Accounts
Receivable
•Credit Sales
Finished
Goods
Inventory
Status
Report
•Debit Cost of Goods Sold
•Credit Inventory
Any Questions?