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Production and Inventory Cycle, Main Components of the manufacturing cycle…
Production and Inventory Cycle
Documents
Customer Production Order
: when a custom manufacture is required
Inventory Production Order
: Bulk production
Raw Materials Issue Slip
: records raw material used in production
Customer Job Card (CJC)
: records machine & human hours for specific customer
Inventory Job Card (IJC)
: Records machine & human hours for bulk production
Job transfer / inventory movement sheet
: document authorizing the transfer of WIP to next stage of prodcution
Inventory master files
: records detail of all inventory movements
Daily Production Report
: detail of each job in process (materials, time and acc. costs)
Completed production report
: total cost of rae materials, time, qty of goods and overhead allocated costs
Main Function
Production Planning and Control
Production processing
Issue of raw materials
movement of goods through production process
Transfer of manufactured goods to finished goods
Inventory Management
Production Planning and Design
Begin: CPO/IPO
Segregation of Duties: PO authorized by planning department before accepted by production processing department/ factory manager (must be signed)
CJC or IJC generated to capture all costs
Raw materials
direct hours by staff
machine hours
Daily report sent to production planning dept / manager to monitor progress
Finished goods transferred to inventory
Production Process
Pre-numbered RMI slip (prepares by production planning or factory manager)
all issued items must be accounted for and allocated to CJC or IJC
all RM must be listed on daily production report
Daily Production report sent to RM store to compare with RM inventory master file to verify
CJC or IJC: time spent (employees and machines) to be captured
Production Manager must sign off goods moving to next stage
Finished Goods: Quality Control Inspection
FG accepted signed off on the completed production report by authorized staff
Inventory Management
ledger accounts must be updated (cost of WIP/completed goods)
Acc. dept. monitor and record all production records
-- Direct material costs of RM/consumables
payroll cots
overhead allocation
transfer of accumulating costs
Transfer of final cost
4 main controls
Entries supported by documents
Raw materials Issue slips
CJC or IJC with machine/labour hours
acknowledgment of goods: Goods Transfer Note
Amounts in GL should agree back to daily production reports (WIP) / completed production report (FG)
Storage and dispatch of manufactured inventory
All purchases must be accounted for
RM --> charge to production
WIP--> FG (cost must be accounted for)
Sold items: cost transferred to cost of sales and invoiced to relevant customer
Periodic inventory counts
Maintenance of inventory master files
Avoid OOS
Monitor slow moving inventory / damaged / obsolete inventory
Monitor deliveries
Monitor existence of inventory
Physical and monitoring controls
Perpetual Inventory
Issue of goods at selling price
GP analysis
Physical Control
Fix date
Fix responsibility
Control over stationery
Control over inventory movement
Cut off
Explicit explanations
Overall plan
prep inventory
decide method of counting
method of recording counts
responsibility of tasks
Monitoring of inventory levels
Inventory Counts
Supervised
teams of 2
must be signed
all counts sheets/tags accounted for
Internal Controls and Control Objectives
General Controls
Safeguarding
Completeness, Existence
Inventpry locked in a storeroom
Safeguard against elements
Issue of raw materials to production
Completeness, Validity
Recording
Completeness,
Accuracy**
Main Components of the manufacturing cycle
Inputs
Production Process
Outputs