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Unit 3 Production and inventory cycle, generate - Coggle Diagram
Unit 3 Production and inventory cycle
Production planning and design
The design of items to be manufactured, production planning and control thereof
Start of the production process
Authorisation of either a pre numbered customer production order (CPO) or an inventory production order (IPO)
Done by the production planning department
based on established trends for the replenishment of finished goods inventory items
re-order levels
out of stock
future demand in excess
Seggregation of duties
production order should be formally authorised
production planning department
factory manager
Upon acceptance of CPO/IPO
customer job card (CJC), or inventory job card (IJC)
raw materials used;
direct hours worked by production staff; and
machine hours.
Daily production report
any unusual charges allocated for raw material, labour and overheads, which should be queried and rectified
Production processing
Issue of raw materials to production process
Must be listed on the daily production report
copy sent to the raw materials stores staff to compare with the raw material inventory master file records for that day
Movement of goods through production process
Time spent on each stage of production must be captured on CJC or IJC
Write time on card
Clock in or out
At the end of each day, the total time recorded on job cards should be reconciled to the total hours worked by production staff
Discrepancies should be queried and corrected by the production manager at the end of the day/week
The shift foreman or production manager should be assigned the responsibility of inspecting that each stage of the production process has been properly completed
Transfer of manufactured goods to finished goods
Once the production process is complete, a quality control inspection should be performed to detect any apparent defects
The raw materials, labour and machine hours worked, as well as overhead allocations on the completed job card should be inspected by the production manager to ensure all production charges are correctly recorded
Any differences or variances from standard costs, and any unexpected items such as labour overruns, should be duly authorized by the production manager
The factory or production manager should authorize, by signature, the transfer of the manufactured goods to inventory
Acceptance of the goods into finished inventory should be acknowledged by signing the completed production report by the finished goods inventory stores staff
Second function
Pre-numbered raw materials issues slip (RMI)
Is a request for the issue of raw materials
Prepared by the production planning department, production department or factory manager
allocated to the particular work in progress customer job card (CJC) or inventory job card (IJC)
Inventory management
Receipt and recording of manufactured/purchased goods
Storage of inventory and maintenance of records
Main controls
Production entries must be supported by the relevant documents;
Storage and dispatch of manufactured inventory;
Maintenance of inventory master files; and
Physical and monitoring controls.
production records
direct material costs of raw materials and consumables to work in progress;
direct payroll costs based on hours worked, allocated to the relevant job or production run;
an overhead allocation for each job or production run, based on labour hours or machine hours worked, depending on the nature of the production process and practices of the entity in prior years;
the transfer of accumulating costs between production stages or departments in work in progress; and
the transfer of the final cost of the finished goods manufactured to finished goods inventory.
Control objectives & Internal controls
General Controls
• Supervision and review
• Segregation of duties
• Rotation of duties
• Personnel take leave regularly
• Management control
• Internal audit
• Sufficient stationery control
• Scrutinise all records and documents for extraordinary items
• Test castings and calculations on all selected items, documents and ledger accounts
Safeguarding
Inventory should be safeguarded against theft and damage
Issue of raw materials to production
Inventory only leaves the storeroom based on properly authorised documentation
Recording
All inventory is accurately recorded at the correct quantity and prices
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