Group 1

Page 1

Elizabeth YanezYohana FloresNicole LugotoffArt Gonzalez Jr.

PurchaseOrder

ReceivingReport

Time Card /Labor Ticket

VendorInvoice

CostStandar

dsProdution

OrderSalesOrder

Raw Materials Inventory

Management

Production Management

Completion of Production

Finished Goods

Inventory Management

CostAccounting

Work In Process Inventory

Cost of GoodsSold

StandardCosts

FinishedGoods

Inventory

RawMaterials Inventory

Raw Material Inventory

Status Report

Finished Goods

Inventory Status Report

Work In Process Inventory Status

Report

Cost Activity or Standard Cost

Variances Report

Acquisisiti

nos/ Payment Process

ProductionProcess

Sales/ Collections

Process

PlanningControl Process

Major Information Flows in the Production Process

INTRODUCTIONINTRODUCTION

Cost standards, Sales orders, receiving reports, and vendor invoices are the type of documents that come in contact with the production master files.

Which then update the existing master files in the production process.

Cost standards, Sales orders, receiving reports, and vendor invoices are the type of documents that come in contact with the production master files.

Which then update the existing master files in the production process.

Production ProcessProduction Process

It is the recurring set of business activities and related data processing operations associated with the manufacturer of products. (Romney & Steinbart)

It shows the overall picture of the production process.

It can be observed that it does not have any contact with external parties.

It is a self contained process that is only updated by forms that come from other departments.

It is the recurring set of business activities and related data processing operations associated with the manufacturer of products. (Romney & Steinbart)

It shows the overall picture of the production process.

It can be observed that it does not have any contact with external parties.

It is a self contained process that is only updated by forms that come from other departments.

Information Flows in the Production Process

Information Flows in the Production Process

The Receiving Report and Vendor Invoice are attached together and sent to Raw Materials Inventory.

Database checks to see what raw materials are available. A purchase order is created for raw materials not available. The Raw Materials Inventory Status Report is updated.

Credit Accounts Payable Debit Raw Materials

The Receiving Report and Vendor Invoice are attached together and sent to Raw Materials Inventory.

Database checks to see what raw materials are available. A purchase order is created for raw materials not available. The Raw Materials Inventory Status Report is updated.

Credit Accounts Payable Debit Raw Materials

PurchaseOrder

ReceivingReport

VendorInvoice

RawMaterials Inventory

RawMaterials Inventory

Raw Materials Inventory

Management

RawMaterials Inventory

Raw Material

Inventory Status Report

COST ACCOUNTINGCOST ACCOUNTING

Cost Accounting is the process of tracking, recording, and analyzing costs associated with the products or activities of an organization.

The time card is the direct labor involved in the production process. Indirect labor is included as part of the operating expenses and can’t be traced back to the product.

The Time Card is sent to Cost Accounting along with the updated costs of Raw Materials.

Cost Accounting is the process of tracking, recording, and analyzing costs associated with the products or activities of an organization.

The time card is the direct labor involved in the production process. Indirect labor is included as part of the operating expenses and can’t be traced back to the product.

The Time Card is sent to Cost Accounting along with the updated costs of Raw Materials.

Time Card /Labor Ticket

CostAccounting

RawMaterials Inventory

Planning Control ProcessPlanning Control Process

The Cost Standards is coming from the planning control process. It updates the Standards Costs master file which then is sent to Cost Accounting for verification of costs.

A report is created by Cost Accounting regarding cost activity or standard cost variances.

The Cost Standards is coming from the planning control process. It updates the Standards Costs master file which then is sent to Cost Accounting for verification of costs.

A report is created by Cost Accounting regarding cost activity or standard cost variances.

CostStandards

CostAccounting

StandardCosts

Cost Activity or Standard Cost

Variances Report

Sales/Collection ProcessSales/Collection Process

The Sales-Collection Process creates a Sales Order which is then sent to the Production Process where a production order is created.

The orders are sent to production management which updates the work-in-process inventory.

Then a work-in-process report is produced.

The Sales-Collection Process creates a Sales Order which is then sent to the Production Process where a production order is created.

The orders are sent to production management which updates the work-in-process inventory.

Then a work-in-process report is produced.

ProductionOrder

Sales Order

Production Management

Work In Process Inventory

Work In Process Inventory Status Report

Completion of InventoryCompletion of Inventory

After the product is finished the computer processes the completion of the work and updates and changes data.

Once the data is updated it is transferred to the Finished Goods Inventory data disk.

The information is then input/updated in the Finished Goods Inventory Status Report and the Cost of Goods Sold data disk.

Once the inventory is updated the computer processes the information and sends a completed order to the production order (letting them know that the order has been completed)

OR

Once the inventory is updated the computer processes the information and sends any products that have defects back to production order where it is then sent back to production management and work in process inventory.

After the product is finished the computer processes the completion of the work and updates and changes data.

Once the data is updated it is transferred to the Finished Goods Inventory data disk.

The information is then input/updated in the Finished Goods Inventory Status Report and the Cost of Goods Sold data disk.

Once the inventory is updated the computer processes the information and sends a completed order to the production order (letting them know that the order has been completed)

OR

Once the inventory is updated the computer processes the information and sends any products that have defects back to production order where it is then sent back to production management and work in process inventory.

Completion of Production

Finished Goods Inventory

Management

Cost of Goods

Sold

FinishedGoods

Inventory

ProductionOrder

Finished Goods InventoryStatus Report

Time Card/Labor Ticket (1)Time Card/Labor Ticket (1)

The transfer of the labor ticket/time card should be done with great caution because of the threats which may occur such as: 1) Inaccurate time data – Which can be solved by implementing an automation of data collection; various edit checks to verify the hours worked; or reconciliation of time card data with job-time ticket data. 2) Another threat may include the unauthorized change to payroll master file – Which is most effectively solved by the segregation of duties, and audits of all changes to payroll master file.

The transfer of the labor ticket/time card should be done with great caution because of the threats which may occur such as: 1) Inaccurate time data – Which can be solved by implementing an automation of data collection; various edit checks to verify the hours worked; or reconciliation of time card data with job-time ticket data. 2) Another threat may include the unauthorized change to payroll master file – Which is most effectively solved by the segregation of duties, and audits of all changes to payroll master file.

Vendor Invoices (2)Vendor Invoices (2)

The process of approving and paying vendor invoices may create threats within the company. Two threats that may occur include but are not limited to: 1) Paying for goods not received – This threat may be solved by only paying invoices supported by original receiving report (making it near impossible to pay for the invoice more that once. 2) The second threat may include failing to catch errors in vendor invoices – This could be solved by double-checking invoice accuracy, as well as the proper training of accounts payable staff.

The process of approving and paying vendor invoices may create threats within the company. Two threats that may occur include but are not limited to: 1) Paying for goods not received – This threat may be solved by only paying invoices supported by original receiving report (making it near impossible to pay for the invoice more that once. 2) The second threat may include failing to catch errors in vendor invoices – This could be solved by double-checking invoice accuracy, as well as the proper training of accounts payable staff.

Sales Order Entry (3)Sales Order Entry (3)

Two threats that the Sales/Collection Process may encounter while inputting the information into the sales order to be sent to the production Process may include: 1) Legitimacy of orders – This threat may be solved by making signatures on paper documents, digital signatures, and digital certificates for e-business mandatory on all sales orders. 2) Credit sales to customers with poor credit – This second threat may be solved by getting credit card approval by the credit manager, not by the sales function, as well as having accurate records of customer account balances.

Two threats that the Sales/Collection Process may encounter while inputting the information into the sales order to be sent to the production Process may include: 1) Legitimacy of orders – This threat may be solved by making signatures on paper documents, digital signatures, and digital certificates for e-business mandatory on all sales orders. 2) Credit sales to customers with poor credit – This second threat may be solved by getting credit card approval by the credit manager, not by the sales function, as well as having accurate records of customer account balances.

Internal Controls for Cost Accounting (4)Internal Controls for Cost Accounting (4)

When the merchandise is received a control needs to be place to verify that the product received is correct.

When the invoice is received the prices need to be matched with the purchase order.

The time card needs to be verified by a supervisor to make sure that the hours reported are correct.

When the merchandise is received a control needs to be place to verify that the product received is correct.

When the invoice is received the prices need to be matched with the purchase order.

The time card needs to be verified by a supervisor to make sure that the hours reported are correct.

Internal Controls for Raw Materials Inventory Management (5)

Internal Controls for Raw Materials Inventory Management (5)

One manager needs to check the database for the inventory needed and create a purchase order.

Another manager verifies the purchase order and checks for correctness.

A purchase order requisition form needs to be authorized by a supervisor.

One manager needs to check the database for the inventory needed and create a purchase order.

Another manager verifies the purchase order and checks for correctness.

A purchase order requisition form needs to be authorized by a supervisor.

Internal Control forProduction Management (6)

Internal Control forProduction Management (6)

Checks to see that a sales order is not duplicated in the system.

Checks to see that a sales order is not duplicated in the system.

Internal Control for Completion of Production (7)

Internal Control for Completion of Production (7)

Restricted physical access to work-in-process and finished goods inventories.

Documentation of all material movements should be made.

Periodic counts of inventory.

Restricted physical access to work-in-process and finished goods inventories.

Documentation of all material movements should be made.

Periodic counts of inventory.

Internal Controls forFinished Goods Inventory Management (8)

Internal Controls forFinished Goods Inventory Management (8)

After the inventory is completed a batch total should be printed to make sure that the items have been correctly produced.

After the inventory is completed a batch total should be printed to make sure that the items have been correctly produced.

PurchaseOrder

ReceivingReport

Time Card /Labor Ticket

VendorInvoice

CostStandards

ProdutionOrder

SalesOrder

Raw Materials Inventory

Management

Production Management

Completion of Production

Finished Goods Inventory

Management

CostAccounting

Work In Process Inventory

Cost of GoodsSold

StandardCosts

FinishedGoods

Inventory

RawMaterials Inventory

Raw Material Inventory

Status Report

Finished Goods

Inventory Status Report

Work In Process Inventory Status

Report

Cost Activity or Standard Cost

Variances Report

Acquisitios/

Payment

Process

ProductionProcess

Sales/ Collections

Process

PlanningControl Process

Major Information Flows in the Production Process

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