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Cost Management System

The production cycle consists of production planning, scheduling, inventory control, and cost accounting. It involves planning which products to produce, scheduling production to optimize resource use, and controlling inventories. The human resource management business process establishes an information system to manage employee data like organizational structure, job descriptions, and qualifications. Payroll processing is a complex procedure that requires maintaining files on employee information, payroll records, tax tables, and generating government reports to comply with frequent changing regulations and tax rates.

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sohail Nazir
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300 views21 pages

Cost Management System

The production cycle consists of production planning, scheduling, inventory control, and cost accounting. It involves planning which products to produce, scheduling production to optimize resource use, and controlling inventories. The human resource management business process establishes an information system to manage employee data like organizational structure, job descriptions, and qualifications. Payroll processing is a complex procedure that requires maintaining files on employee information, payroll records, tax tables, and generating government reports to comply with frequent changing regulations and tax rates.

Uploaded by

sohail Nazir
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Production cycle Business

activities
➤ The Production cycle consists of
production planning, production
scheduling, inventory control and cost
accounting.

1
The Production Cycle
➤ Production generally includes the following activities and
related transactions.
– Production planning
– Sales forecast
– Inventory status report (details the resources available
in inventory)
– Factor availability report (a report that communicates
the availability of labor and machine resources)
– Production scheduling
– Bills of material
2
– Master operations list
Production Control

➤ Production control involves planning which


products to produce and scheduling production to
make optimal use of resources.
➤ Basic production requirements are provided by the
bill of materials (a list of all components and their
quantities used to make a finished good) and a
master operation list (identifies and specifies the
sequencing of all labor operations and/or machine
operations that are necessary to produce a product) 3
Production Control

➤ Determining what products to manufacture


requires an integration of the following:
– demand for a product
– product requirements
– production resources available

4
Inventory Control

➤ The control of inventories is accomplished


through a series of inventory records and
reports.
➤ These reports provide the following
information:
– inventory use
– inventory balances
– minimum and maximum levels of stock
5
Inventory Control

➤ What is a reorder point?


➤It is the level of inventory at which it is
desirable to order or produce additional items
to avoid an out-of-stock condition.
➤ What is the economic order quantity (EOQ)?
➤It is the order quantity that minimizes total
inventory order costs and inventory carrying
costs.
6
Inventory Control
➤ EOQ = economic order quantity
➤ R = requirements for the item per period (in
number of units)
➤ S = purchasing cost per order (fixed costs that are
incurred each time an item is ordered)
➤ P = inventory carrying cost per unit (insurance,
taxes, interest, storage costs)
EOQ = 2×R×S
P
7
Inventory Control

➤ What is lead time?


➤ It is the time between placing an order
and the receipt of the goods.
➤ The inventory usage rate is the quantity
of the goods used over a period of time.
➤ Reorder point = Lead time in days ×
Average inventory usage rate/day
8
Inventory Control

➤ An important part of inventory control is


the evaluation of inventory turnover to
determine the age, condition, and status
of stock.
➤ Control over inventory includes methods
of storing and handling.

9
Just-in-Time (JIT) Production

➤ Just-in-time production is a term used to


describe a production system in which parts
are produced only as they are required in
subsequent operations.
➤ JIT systems differ from conventional
systems in that inventories of work in
process, raw materials, and finished goods
are minimized or totally eliminated.
10
Cost accounting

➤ Cost accounting focuses on the


management of three manufacturing
inventories.
➤ What are these inventories?
1 Raw materials
2 Work in process (WIP)
3 Finished goods

11
Job/Process Costing

➤ What is job costing?


➤It is a procedure in which costs are
distributed to particular jobs or
production orders.
➤It requires a production order control
system.
➤ What is process costing?

12
Process costing

➤ It is a procedure in which costs are compiled


in process or department accounts by periods.
➤ At the end of each period, the cost of each
process is divided by the units produced to
determine the average cost per unit.
➤ “Costs” in either job or process costing may
be actual or standard or normal costs.

13
Information Needs

Operational/Strategic information needs


➤ Cost information
➤ Traditional Vs Activity based costing
➤ Total quality management
➤ Statistical process control. Defect rates,
breakdown frequency, Machine utilization
➤ Amount of rework, outgoing quality level

14
Summary

➤Ideally, a production cycle


database should provide both the
cost and operational information
needed to mange the production
process well.

15
Human Resource Management
Business Process
➤ The business process that involves
management of human resources is
concerned with establishing and
maintaining an information system that
processes human resources (HR)
information.

16
Human Resource Management
Business Process
➤ The HR system should provide tools for
the setup and maintenance of information
pertaining to the organizational structure.
– a listing of jobs that exist in an organization
– a listing of job descriptions
– a listing of any qualifications that are
required for a job
17
Transactions in Payroll
Processing
➤ Payroll processing is one of the most
complex procedures in operation.
➤All levels of government impose payroll
taxes.
➤Regulations and rates are constantly
changing.
➤The payroll system requires frequent
modifications.
18
Transaction in Payroll Processing

➤ Payroll processing is one area in which the


law imposes not only a fine but a jail
sentence for willful negligence in
maintaining adequate records.

19
Transaction Cycle Controls
in Payroll Processing
Timekeeping Payroll Personnel
Job Time Authorization, Authorization,
Summary Notification Notification
Reconcile Employee Hiring,
Employee Terminations,
Time Cards Raises, Deductions

Payroll
Employee
Register
Time Cards

Paychecks
20
Information Needs in Payroll Processing

➤ Numerous files must be maintained in a payroll


system. Examples:
– basic employee information
– payroll register or journal
– government reports
– tax tables (Social security and other tax
legislation imposes four taxes based on payrolls:
FICA, federal and state unemployment
insurance, and income taxes withheld) 21

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