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Production and Inventory
Cycle, The accounting department, has to monitor…
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The accounting department, has to monitor the production records and ensure that all amounts are recorded in the correct accounts
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• the transfer of accumulating costs between production stages or departments in work in progress; and
• 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;
• direct payroll costs based on hours worked, allocated to the relevant job or production run;
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The inventory management system is made up of four main controls, namely:
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.
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Production Processing
The pre-numbered raw materials issues slip (RMI) is a request for the issue of raw materials required for a particular production run.
It should be prepared either by the production planning department or, more likely, the production department or factory manager.
All such issues to production must be accounted for as allocated to the particular work in progress customer job card (CJC) or inventory job card (IJC).
All raw materials issued to production should be listed on the daily production report and a copy sent to the raw materials stores staff to compare with the raw material inventory master file records for that day.
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Inventory Cycle
The relevant ledger accounts must be updated as cost of work in progress and completed manufactured goods are recorded in the manufacturing process.