Chapter 11-1. Chapter 11-2 Accounting Information Systems, 1 st Edition Conversion Processes and...
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Transcript of Chapter 11-1. Chapter 11-2 Accounting Information Systems, 1 st Edition Conversion Processes and...
Chapter 11-1
Chapter 11-2 Accounting Information Systems, 1st Edition
Conversion Processes and Controls
Chapter 11-3
1. Basic features of conversion processes
2. The components of the logistics function
3. Cost accounting reports generated by conversion processes
4. Risks and controls in conversion processes
5. IT systems of conversion processes
6. Ethical issues related to conversion processes
7. Corporate governance in conversion processes
Study ObjectivesStudy ObjectivesStudy ObjectivesStudy Objectives
Chapter 11-4
Conversion processes - activities related to the transformation of resources into goods or services.
Resources include:
Materials
Labor
Overhead
Various other expenses necessary to run the operating facility
SO 1 Basic features of conversion processesSO 1 Basic features of conversion processes
Basic Features of Conversion Basic Features of Conversion ProcessesProcessesBasic Features of Conversion Basic Features of Conversion ProcessesProcesses
Chapter 11-5
Major activities within this process include
Operational planning,
Optimizing use of employees, property, and inventories,
Controlling production flows,
Ensuring product quality, and
Preparing related cost accounting and financial accounting records.
SO 1 Basic features of conversion processesSO 1 Basic features of conversion processes
Basic Features of Conversion Basic Features of Conversion ProcessesProcessesBasic Features of Conversion Basic Features of Conversion ProcessesProcesses
Chapter 11-6
Exhibit 11-1 Conversion Processes withinthe Overall System
Basic Features of Basic Features of Conversion Conversion ProcessesProcesses
Basic Features of Basic Features of Conversion Conversion ProcessesProcesses
SO 1 Basic features of conversion SO 1 Basic features of conversion processesprocesses
Chapter 11-7 SO 1 Basic features of conversion SO 1 Basic features of conversion
processesprocesses
Basic Features of Conversion Basic Features of Conversion ProcessesProcessesBasic Features of Conversion Basic Features of Conversion ProcessesProcesses
Exhibit 11-2Overview of the Conversion Processes
Chapter 11-8
Manufacturing has changed in recent years as a result of each of the following factors except:
a. globalization
b. technological advances
c. increased competition
d. lack of economic prosperity
Quick ReviewQuick Review
SO 1 Basic features of conversion SO 1 Basic features of conversion processesprocesses
Basic Features of Conversion Basic Features of Conversion ProcessesProcessesBasic Features of Conversion Basic Features of Conversion ProcessesProcesses
Chapter 11-9 SO 2 The components of the logistics functionSO 2 The components of the logistics function
Components of the Logistics Components of the Logistics FunctionFunctionComponents of the Logistics Components of the Logistics FunctionFunctionLogistics is the logical, systematic flow of resources throughout the organization.
Three primary components:
planning,
resource management, and
operations.
Chapter 11-10 SO 2 The components of the logistics functionSO 2 The components of the logistics function
Components of the Logistics Components of the Logistics FunctionFunctionComponents of the Logistics Components of the Logistics FunctionFunction
Exhibit 11-3Components of the Logistics Function
bill of materials
operations list
Production orders
Production schedule
Chapter 11-11 SO 2 The components of the logistics functionSO 2 The components of the logistics function
Components of the Logistics Components of the Logistics FunctionFunctionComponents of the Logistics Components of the Logistics FunctionFunction
Exhibit 11-3Components of the Logistics Function
Terminology
Economic Order Quantities (EOQ)
Raw materials
Work-in-process
Finished goods
Inventory status report
Chapter 11-12
Components of the Logistics Components of the Logistics FunctionFunctionComponents of the Logistics Components of the Logistics FunctionFunction
Operations may be performed by :
Continuous processing of homogeneous products
Batch processing
Custom, made-to-order processing Exhibit 11-3Components of the Logistics Function
SO 2 The components of the logistics functionSO 2 The components of the logistics function
Chapter 11-13
Components of the Logistics Components of the Logistics FunctionFunctionComponents of the Logistics Components of the Logistics FunctionFunction
SO 2 The components of the logistics functionSO 2 The components of the logistics function
Exhibit 11-5Production Process Map
See next slide for larger image.
Chapter 11-14
Components of the Logistics Components of the Logistics FunctionFunctionComponents of the Logistics Components of the Logistics FunctionFunction
SO 2 The components of the logistics functionSO 2 The components of the logistics function
Exhibit 11-5Production Process Map
Chapter 11-15
Components of the Logistics Components of the Logistics FunctionFunctionComponents of the Logistics Components of the Logistics FunctionFunction
SO 2 The components of the logistics functionSO 2 The components of the logistics function
Exhibit 11-5Production Process Map
Chapter 11-16
The term conversion processes is often used synonymously with
a. operations.
b. production.
c. manufacturing.
d. all of the above.
Quick ReviewQuick Review
SO 2 The components of the logistics functionSO 2 The components of the logistics function
Components of the Logistics Components of the Logistics FunctionFunctionComponents of the Logistics Components of the Logistics FunctionFunction
Chapter 11-17
Which of the following activities is not part of the planning component of the logistics function?
a. Research and development
b. Capital budgeting
c. Human resource management
d. Scheduling
Quick ReviewQuick Review
SO 2 The components of the logistics functionSO 2 The components of the logistics function
Components of the Logistics Components of the Logistics FunctionFunctionComponents of the Logistics Components of the Logistics FunctionFunction
Chapter 11-18
Which of the following terms relates to the control of materials being held for future production?
a. Routing
b. Work-in-process
c. Stores
d. Warehousing
Quick ReviewQuick Review
SO 2 The components of the logistics functionSO 2 The components of the logistics function
Components of the Logistics Components of the Logistics FunctionFunctionComponents of the Logistics Components of the Logistics FunctionFunction
Chapter 11-19
When additional procedures are necessary to bring a defective product up to its required specifications, this is referred to as
a. rework.
b. scrap.
c. work-in-process.
d. variance reporting.
Quick ReviewQuick Review
SO 2 The components of the logistics functionSO 2 The components of the logistics function
Components of the Logistics Components of the Logistics FunctionFunctionComponents of the Logistics Components of the Logistics FunctionFunction
Chapter 11-20
A firm expects to sell 1000 units of its best-selling product in the coming year. Ordering costs for this product are $100 per order, and carrying costs are $2 per unit. Compute the optimum order size, using the EOQ model.
a. 10 units
b. 224 units
c. 317 units
d. 448 units
Quick ReviewQuick Review
SO 2 The components of the logistics functionSO 2 The components of the logistics function
Components of the Logistics Components of the Logistics FunctionFunctionComponents of the Logistics Components of the Logistics FunctionFunction
Chapter 11-21 SO 3 Cost accounting reports generated by conversion SO 3 Cost accounting reports generated by conversion
processesprocesses
Cost Accounting Reports Generated byCost Accounting Reports Generated byConversion ProcessesConversion ProcessesCost Accounting Reports Generated byCost Accounting Reports Generated byConversion ProcessesConversion Processes
Standard costs are expected costs based on projections of a product’s required resources.
Perpetual inventory systems involve
recording purchases as raw materials inventory,
recording all components of work-in-process for inventories in various stages of production, and
recording total cost of sales for products completed and sold.
Chapter 11-22 SO 3 Cost accounting reports generated by conversion SO 3 Cost accounting reports generated by conversion
processesprocesses
Cost Accounting Reports Generated byCost Accounting Reports Generated byConversion ProcessesConversion ProcessesCost Accounting Reports Generated byCost Accounting Reports Generated byConversion ProcessesConversion Processes
Periodic inventory systems involve
updating the inventory and
cost of sales accounts only at the end of the period.
Variances represent the differences between actual costs and the standard costs applied.
Chapter 11-23 SO 4 Risks and controls in conversion processesSO 4 Risks and controls in conversion processes
Risks and Controls in Conversion Risks and Controls in Conversion ProcessesProcessesRisks and Controls in Conversion Risks and Controls in Conversion ProcessesProcessesCommon procedures within the conversion process:
Authorization of transactions
Initiation of production orders
Issuance of materials into production
Transfer finished goods to warehouse or shipping areas
Segregation of duties
Adequate records and documents
Chapter 11-24
Risks and Controls in Conversion Risks and Controls in Conversion ProcessesProcessesRisks and Controls in Conversion Risks and Controls in Conversion ProcessesProcessesCommon procedures within the conversion process:
Security of assets and documents
Independent checks and reconciliation
Physical inventory count
Physical inventory reconciliation
Cost-benefit considerations
SO 4 Risks and controls in conversion processesSO 4 Risks and controls in conversion processes
Chapter 11-25
Which of the following internal controls is typically associated with the maintenance of accurate inventory records?
a. Performing regular comparisons of perpetual records with recent costs of inventory items
b. Using a just-in-time system to keep inventory levels at a minimum
c. Performing a match of the purchase request, receiving report, and purchase order before payment is approved
d. Using physical inventory counts as a basis for adjusting the perpetual records
Quick ReviewQuick Review
Risks and Controls in Conversion Risks and Controls in Conversion ProcessesProcessesRisks and Controls in Conversion Risks and Controls in Conversion ProcessesProcesses
SO 4 Risks and controls in conversion processesSO 4 Risks and controls in conversion processes
Chapter 11-26
The goal of a physical inventory reconciliation is to
a. determine the quantity of inventory sold.
b. compare the physical count with the perpetual records.
c. compare the physical count with the periodic records.
d. determine the quantity of inventory in process.
Quick ReviewQuick Review
Risks and Controls in Conversion Risks and Controls in Conversion ProcessesProcessesRisks and Controls in Conversion Risks and Controls in Conversion ProcessesProcesses
SO 4 Risks and controls in conversion processesSO 4 Risks and controls in conversion processes
Chapter 11-27
IT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion Processes
Computerized systems may provide the following
benefits:
Automatic computation of materials requirements
Systematic scheduling that allows for greater flexibility and increased efficiencies
Timely transfer of inventories due to the automatic notification features
Validation of data entries
Automatic updating of inventory status reports
Automatic preparation of financial accounting entries and cost accounting reports
SO 5 IT systems of conversion processesSO 5 IT systems of conversion processes
Chapter 11-28
IT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion Processes
Additional trends that enhance the conversion process:
Computer-aided design (CAD)
Computer-aided manufacturing (CAM)
Industrial robots
Materials resource planning (MRP)
Manufacturing resource planning (MRP-II)
Enterprise-wide resource planning (ERP)
Computer-integrated manufacturing systems (CIMs)
Just-in-time (JIT) production systemsSO 5 IT systems of conversion processesSO 5 IT systems of conversion processes
Chapter 11-29
IT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion Processes
Match IT systems on left with their definitions on the right:
SO 5 IT systems of conversion processesSO 5 IT systems of conversion processes
a. A network including production equipment, computer terminals, and accounting systemsCAD
CAM
MRP
MRP-II
ERP
CIMs
JIT
b. Electronic workstation including advanced graphics and 3-D modeling of production processes
c. Automated scheduling of manufacturing resources, including scheduling, capacity, and forecasting functionsd. The minimization of inventory levels by the control of production so that products are produced on a tight schedule in time for their sale
e. A single software system that includes all manufacturing and related accounting applications
f. Automated scheduling of production orders and materials movement
g. Production automation, including use of computers and robotics
Chapter 11-30
IT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion Processes
Match IT systems on left with their definitions on the right:
SO 5 IT systems of conversion processesSO 5 IT systems of conversion processes
a. A network including production equipment, computer terminals, and accounting systemsCAD
CAM
MRP
MRP-II
ERP
CIMs
JIT
b. Electronic workstation including advanced graphics and 3-D modeling of production processes
c. Automated scheduling of manufacturing resources, including scheduling, capacity, and forecasting functionsd. The minimization of inventory levels by the control of production so that products are produced on a tight schedule in time for their sale
e. A single software system that includes all manufacturing and related accounting applications
f. Automated scheduling of production orders and materials movement
g. Production automation, including use of computers and robotics
Chapter 11-31
IT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion Processes
Match IT systems on left with their definitions on the right:
SO 5 IT systems of conversion processesSO 5 IT systems of conversion processes
a. A network including production equipment, computer terminals, and accounting systemsCAD
CAM
MRP
MRP-II
ERP
CIMs
JIT
b. Electronic workstation including advanced graphics and 3-D modeling of production processes
c. Automated scheduling of manufacturing resources, including scheduling, capacity, and forecasting functionsd. The minimization of inventory levels by the control of production so that products are produced on a tight schedule in time for their sale
e. A single software system that includes all manufacturing and related accounting applications
f. Automated scheduling of production orders and materials movement
g. Production automation, including use of computers and robotics
Chapter 11-32
IT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion Processes
Match IT systems on left with their definitions on the right:
SO 5 IT systems of conversion processesSO 5 IT systems of conversion processes
a. A network including production equipment, computer terminals, and accounting systemsCAD
CAM
MRP
MRP-II
ERP
CIMs
JIT
b. Electronic workstation including advanced graphics and 3-D modeling of production processes
c. Automated scheduling of manufacturing resources, including scheduling, capacity, and forecasting functionsd. The minimization of inventory levels by the control of production so that products are produced on a tight schedule in time for their sale
e. A single software system that includes all manufacturing and related accounting applications
f. Automated scheduling of production orders and materials movement
g. Production automation, including use of computers and robotics
Chapter 11-33
IT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion Processes
Match IT systems on left with their definitions on the right:
SO 5 IT systems of conversion processesSO 5 IT systems of conversion processes
a. A network including production equipment, computer terminals, and accounting systemsCAD
CAM
MRP
MRP-II
ERP
CIMs
JIT
b. Electronic workstation including advanced graphics and 3-D modeling of production processes
c. Automated scheduling of manufacturing resources, including scheduling, capacity, and forecasting functionsd. The minimization of inventory levels by the control of production so that products are produced on a tight schedule in time for their sale
e. A single software system that includes all manufacturing and related accounting applications
f. Automated scheduling of production orders and materials movement
g. Production automation, including use of computers and robotics
Chapter 11-34
IT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion Processes
Match IT systems on left with their definitions on the right:
SO 5 IT systems of conversion processesSO 5 IT systems of conversion processes
a. A network including production equipment, computer terminals, and accounting systemsCAD
CAM
MRP
MRP-II
ERP
CIMs
JIT
b. Electronic workstation including advanced graphics and 3-D modeling of production processes
c. Automated scheduling of manufacturing resources, including scheduling, capacity, and forecasting functionsd. The minimization of inventory levels by the control of production so that products are produced on a tight schedule in time for their sale
e. A single software system that includes all manufacturing and related accounting applications
f. Automated scheduling of production orders and materials movement
g. Production automation, including use of computers and robotics
Chapter 11-35
IT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion Processes
Match IT systems on left with their definitions on the right:
SO 5 IT systems of conversion processesSO 5 IT systems of conversion processes
a. A network including production equipment, computer terminals, and accounting systemsCAD
CAM
MRP
MRP-II
ERP
CIMs
JIT
b. Electronic workstation including advanced graphics and 3-D modeling of production processes
c. Automated scheduling of manufacturing resources, including scheduling, capacity, and forecasting functionsd. The minimization of inventory levels by the control of production so that products are produced on a tight schedule in time for their sale
e. A single software system that includes all manufacturing and related accounting applications
f. Automated scheduling of production orders and materials movement
g. Production automation, including use of computers and robotics
Chapter 11-36
IT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion Processes
Match IT systems on left with their definitions on the right:
SO 5 IT systems of conversion processesSO 5 IT systems of conversion processes
Chapter 11-37
Which of the following is not considered a benefit of using computerized conversion systems?
a. Automatic computation of materials requirements
b. Increased sales and cost of sales
c. Increased efficiency and flexibility
d. Early error detection and increased accuracy
Quick ReviewQuick Review
IT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion Processes
SO 5 IT systems of conversion processesSO 5 IT systems of conversion processes
Chapter 11-38
Which of the following represents a method of managing inventory designed to minimize a company’s investment in inventories by scheduling materials to arrive at the time they are needed for production?
a. The economic order quantity (EOQ)
b. Material resource planning (MRP)
c. First-in, first-out (FIFO)
d. Just-in-time (JIT)
Quick ReviewQuick Review
IT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion Processes
SO 5 IT systems of conversion processesSO 5 IT systems of conversion processes
Chapter 11-39
For which of the following computerized conversion systems is Wal-Mart well known?
a. CAD/CAM
b. MRP-II
c. CIMs
d. JIT
Quick ReviewQuick Review
IT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion ProcessesIT Systems of Conversion Processes
SO 5 IT systems of conversion processesSO 5 IT systems of conversion processes
Chapter 11-40
Ethical Issues Related to Conversion Ethical Issues Related to Conversion ProcessesProcessesEthical Issues Related to Conversion Ethical Issues Related to Conversion ProcessesProcesses
Earnings management is the act of misstating financial information in order to improve financial statement results.
Absorption costing involves the inclusion of both variable and fixed costs in the determination of unit costs for ending inventories and cost of goods sold.
SO 6 Ethical issues related to conversion processesSO 6 Ethical issues related to conversion processes
Chapter 11-41
Corporate Governance in Conversion Corporate Governance in Conversion ProcessesProcessesCorporate Governance in Conversion Corporate Governance in Conversion ProcessesProcesses
The internal controls and ethical tone and procedures within the conversion process are also part of the corporate governance structure.
Establishing and maintaining reliable inventory management processes, internal controls, and ethical practices help ensure proper financial stewardship.
SO 7 Corporate governance in conversion processesSO 7 Corporate governance in conversion processes
Chapter 11-42
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