Doris, Jesus, Karen, Stephanie, Wilson

Revised by Dr. Martin

ACC 305 – T/TH

Major Information Flows in the Production Process Narrative

This flowchart positions the Production Process as it interrelates with Sales and Collections, Purchasing and Acquisitions, and Planning Control Processes.

  1. In the Planning Control Process, management produces a Cost Standards document that includes all budgeted costs of production. The management would determine these standards. Standard costs identify the use of materials to construct the product, the amount of labor that would be required, and the budgeted amount of overhead cost. In the Production process, the cost standard document would be entered into the Standard Cost master file. The Standard Cost master file is used by Cost Accounting to evaluate the cost of production. Actual production costs can exceed the standards, producing an unfavorable variance, or “beat” the standards, producing a favorable variance. A cost activity or standard cost variances report is printed from the Standard Cost master file. The Time Card/Labor Ticket is sent to Cost Accounting to input the actual number of hours spent on production. Both direct and indirect labor costs are included on the time card/labor ticket.
  1. A sales order is placed by Sales/Collections Process. The sales order is sent to the Production Process, who create a production order if there are no finished goods available. Production Management sends the needed production order to the Work in Process Inventory master file to move raw materials and labor into production. Raw materials inventory is credited and work in process is debited. An updated Work in Process Inventory Status Report is printed.
  1. The Raw Materials Inventory Management reviews the Raw Materials Inventory master file to determine if any materials are needed to make production. If materials are needed to produce a sales order, Raw Material Management requests a purchased order to be placed by the Acquisitions/Payment Process to vendors. When materials are received, Acquisitions/Payment Process compares the receiving report with the vendors invoice and then updates the Raw Materials Inventory master file with the quantity and type of materials received. A Raw Material Inventory Status Report is printed from the updated Raw Materials Inventory master file. This report includes both direct and indirect materials.
  1. The Work in Process Inventory contains actual material cost (direct and indirect) and labor (direct and indirect) cost that is incurred in production. Costs are added (debit) are production proceeds. Inventory is transferred to Completion of Production when the production order is completed (debit finished goods, credit WIP). The Finished Goods Inventory Status Report is printed from the Finished Goods Inventory master file with the finished product specifications. When goods are sold, the Cost of Goods Sold is updated in the Sales/Collections Process. Cost of Goods sold is debited and finished goods inventory is credited.
  1. After goods are finished, Management in the Inventory Department checks and compares the production order to finished goods. A new Production Order is created for finished goods needing completion, rework, or repair for damage.