Data Flowchart (DOC)

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					Flowchart Narrative
Flowchart 1
Group 1
ACC 305
                 Flowchart 1 is an overview of the Production Cycle. The Production
              Cycle is a recurring set of business activities and related data processing
              operations associated with the manufacture of products. In understanding
              the flowchart it is best to look at its relationships and interactions with the
              other cycles.

                   Using a context diagram, the Production Cycle was shown as being
               linked to the Revenue Cycle by receiving customer orders and sales
               forecasts from the Revenue Cycle, and sending finished goods to the
               revenue cycle. It is linked to the Expenditure Cycle by sending purchase
               requisitions to order raw materials to the Expenditure Cycle, and the
               Expenditure Cycle then allocates overhead and raw materials costs to the
               Production Cycle. The Production Cycle is linked to the Human
               Resource/Payroll Cycle by requesting labor from HRP, which then
               allocates the labor costs to the Production Cycle. Management receives
               reports from the Production Cycle, which sends cost of goods produced
               information to the General Ledger and Reporting System.

                  The overall performance of the Production Cycle can be improved
               through technology. The entire process should be integrated, using
               relational databases linked to internal and external sources as part of an
               ERP (Enterprise Resource Planning) operation. CIM (Computer Integrated
               Manufacturing) using robots and on-line terminals can rapidly implement
               production plans, reducing costs. Data about the costs of production,
               stored in the work in process file and used in cost accounting, can be
               integrated with production operations information regarding the physical
               aspects of the manufacturing operation to give real time information to
               enable companies to monitor quality and correct defects before they drive
               up costs. This is a basis for the ABC (Activity Based Accounting)
               systems.

                  ABC cost systems allocate costs to the activities that create them, such
               as grinding and polishing, and then subsequently allocate those products to
               departments or products. An underlying objective of activity based costing
               is to link costs to corporate strategy. Corporate strategy results in decisions
               about what goods and services to produce. Activities must be performed to
               produce these goods and services, which in turn incur costs. Consequently,
               by measuring the costs of basic activities, such as materials handling or
               processing purchase orders, ABC provides information to management for
               evaluating the consequences of strategic decisions. As cost accounting is
               the basis of decision making in the organization, and detailed, relevant
               information used in its proper context is the basis of decision making,
               ABC costing can be a powerful tool.
Flowchart Narrative
Flowchart 1
Group 1
ACC 305
                 The basic activities of the production cycle are product design,
              planning and scheduling, production operations, and cost accounting.
              Accountants’ input is extremely important in the design stage, where
              comparisons of various components and methods for quality and cost need
              accounting data and analysis. Similarly, accounting data is gathered at
              every stage to include in management reports and financial statements.
              The managerial reports can be wide-ranging, dealing with vendor quality
              and reliability, worker performance, inventory control, re-work and back-
              order issues among many others.

                 There are four symbols on the flowchart; documents are represented by
              a rectangle with an irregular bottom edge, input/output by a parallelogram,
              computer processing by a rectangle, and data storage by cylinder. The
              starting point of the flowchart depends on the type of product being
              produced. If demand is known and regular, the MRP11 (Materials
              Resource Planning) method would be used, where the purchase order on
              the upper left corner would be the starting point. This would be the system
              used for such products as cereal, where you would pre-order materials
              anticipating demand. If demand is unknown or uncertain, then JIT (Just in
              Time) would be used. Then the process would start on the right side of the
              flowchart with the sales order. This would entail working closely with
              flexible suppliers that could deliver materials quickly as sales orders are
              received. New apparel fashions, where demand might not be known, are
              an example.

                  Whatever the starting point, the first step would be to see if there are
              enough raw materials (upper left hand of flowchart). If there are enough
              raw materials, then create a raw material inventory status report. If there is
              not enough, then you would create a purchase order to buy them. The
              materials are then ordered by requisition through the expenditure cycle,
              which generates a purchase order that is sent to the vendor. The vendor
              ships the order, accompanied by a vendor invoice, and it is received by the
              receiving department, which makes out a receiving report detailing the
              type, quantity, and quality of goods received. It is compared with the
              purchase order, and any discrepancies are ironed out with the supplier,
              such as insufficient quantities, damaged goods, or suspect quality (usually
              by credit memo). Bar-coding and radio frequency tags can increase
              efficiency in establishing correct quantities. Signing the receiving report
              can be done at the receiving station through terminals that have access
              controls and require an electronic signature.

                  Once it has been decided to accept shipment of the goods, they are
              then transferred from receiving to inventory, with the goods being entered
              into the raw materials inventory master file. From the product design
              activity two documents are created, the bill of materials and the operations
Flowchart Narrative
Flowchart 1
Group 1
ACC 305
              list. The bill of materials specifies the part number, description, and
              quantity of each component used in the finished product, the operations
              list specifies the labor and machine requirements needed to manufacture
              the product. Materials requisitions, containing the production order
              number, date of issue, and based on the bill of materials, the parts number
              and quantities of all necessary raw materials would authorize any
              subsequent removal of raw materials from the storeroom to the factory
              location where they will be used. Subsequent transfers of the materials
              through the factory are documented by move tickets, specifying the parts
              being transferred, the location to which they are transferred, and the time
              of transfer. Electronic signature requirements at stations accepting the
              transfers, with access controls, are a control improvement.

                  The next part of the flowchart details the cost accounting procedures to
              be followed. It is important to keep in mind the principal objectives of cost
              accounting, accurate and timely decision making regarding product mix,
              product pricing, resource allocation and planning, and cost management.
              On the flowchart, standard cost documents containing budgeted rates for
              labor/oh and cost of raw materials estimated from previous periods’ data,
              forecasts, and managerial creative input, are put in the standard cost file.
              They are then compared to the actual costs of labor/oh from time
              cards/labor tickets, and raw materials from the raw materials/inventory
              files. Appropriate accounts are then debited/credited, updating
              WIP/inventory files. A cost activity report/cost variance report is then sent
              to management, detailing the differences in actual/estimated costs.

                 The following phase is work in process. This follows the raw materials
              processing and cost accounting phases. Activity based costing is used to
              capture performance cost data by each cost driver. If products have been
              rushed into production due to favorable sales forecasts, opportunities to
              standardize component usage with other products can result in lower costs
              and higher quality and should be forwarded to the design phase.

                 The next phase is finished goods inventory management, where the
              major considerations are quality control, re-work, controls to ensure the
              security of the finished goods, and ways to improve the manufacturing
              process that can be passed on to product design. Prevention costs through
              increased training and quality control of raw materials, inspection costs
              associated with testing, internal failure costs associated with re-working
              defective products, and external failure costs of selling defective products
              must be examined and weighed against one another. Calculating inventory
              and cost of goods sold values for the company’s financial statements are
              done at this step by way of the cost of goods sold file and the finished
              goods inventory status report, which is generated by the batch totals from
              the finished goods master file. The cost of goods sold file is also updated
Flowchart Narrative
Flowchart 1
Group 1
ACC 305
              using the batch totals by a double entry, one debiting accounts receivable
              and crediting sales, the other debiting cost of goods sold and crediting
              inventory. To ensure accuracy and reliability in recording and posting, edit
              controls, bar-code scanning, and reconciliation of recorded amounts to
              physical amounts should be used. Disaster and recovery plans should be
              formulated, including off site storage of duplicate files.

				
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