Chapter 10 THE PRODUCTION BUSINESS PROCESS TEACHING TIPS I usually gloss over the materials on job costing, for my students have covered job costing in their Cost/Managerial course. I do emphasize the need for good ledger control over property, plant, and equipment. THE PRODUCTION BUSINESS PROCESS Production Planning and Control. A sales order or sales forecast cause the creation of production orders which specify items that should be produced. Materials are requisitioned and production is scheduled. Items are produced, inspected, transferred to finished goods inventory, then transferred to shipping to complete the process. Basic production requirements are provided by the bill of materials ...view middle of the document...
The economic order quantity (EOQ) must balance two system costs—total carrying costs and total ordering costs: EOQ = economic order quantity (units) R = requirements for the item this period (units) S = purchasing cost per order P = unit cost I = inventory carrying cost per period, expressed as a percentage of the period inventory value Then ___________ / 2 x R x S \/ P x I
10 The Production Business Process
Lean Production is a term used to describe a production system in which parts are produced only as they are required in subsequent operations. The concept of lean production is based on the concept that inventory is waste. Lean production systems expose the hidden causes of maintaining inventory. Property Accounting Applications Fixed Assets. Every organization, including those on a cash basis, should keep a ledger of fixed assets as an aid to effective control. A fixed asset register is a systematic listing of an organization's fixed assets. There are four objectives of fixed asset or investment accounting applications: 1. Maintain adequate records that identify assets with description, cost, and physical location. 2. Provide for appropriate depreciation and/or amortization calculations for book and tax purposes. 3. Provide for reevaluation for insurance and replacement cost purposes. 4. Provide management with reports for planning and controlling the individual asset items. Investments. The investment register should contain all relevant information, such as certificate numbers and the par value of securities, to facilitate identification and control. QUICK RESPONSE MANUFACTURING SYSTEMS Components of Quick Response Manufacturing Systems The Physical Manufacturing System. Two subsystems directly support the physical manufacturing system. These include the CADD (computer-aided design and drafting) and CAM (computer-aided manufacturing) systems.. Some CAM systems, called flexible manufacturing systems (FMS), incorporate programmable production processes that can be quickly reconfigured to produce different types of products. FMS can significantly contribute to the overall speed in which a system responds, for it can greatly speed up time-consuming retooling. The Manufacturing Resource Planning (MRP II) System. The MRP II system comprises the materials requirements planning (MRP) system and the related systems for sales, billing, and purchasing. But the MRP system is the heart of the MRP II system. Advanced Integration Technologies. Automatic identification enhances integration because electronically tagging products and materials effectively makes them machine-readable and thus physically part of the organization's computer-based information system. Radio Frequency Identification, or RFID, is an automatic identification technology that uses low power radio waves to send and receive data between RFID tags and readers. EDI enhances integration because it effectively integrates the company's system with the systems...