Cycle: Inventory and production Flashcards
Explain internal cycle
This cycle has no direct interface with entities outside the company. The acquisitions cycle “puts in” the inventory and the revenue cycle “takes out” the inventory. Therefore control in the inventory cycle requires good control within these two other supporting cycles.
What should the inventory and production cycle must achieve in an internal cycle?
- Control the physical transfer (movement) of inventory (in its various forms)
- Protect the inventory from damage, loss and theft, regardless of whether it is manufactured inventory or inventory purchased for resale
- Plan, control and record the costs of manufacture.
Define goods note received
On transfer of inventory items (of whatever kind) from the goods receiving bay into the warehouse, the warehouse clerk will sign the goods received note which was made out when the goods were delivered by the supplier.
Define materials (components), requisition, material (components) issue note
A materials (component) requisition is a documented request to the warehouse to release materials or components to the production section, and a materials (components) issue note records the issue of materials to production.
Define manufacturing or production schedules
These documents are used to notify the production/manufacturing department as to what is to be produced.
What is to be produced will be decided by an analysis of future sales (forecasts), current inventory holdings of finished goods and specific orders or contracts which have been obtained. The analysis will be committed to a production plan.
Define job cards
A job card is a document which tracks the stages of production for a specific job. As costs are accumulated,
for example raw materials used, labour hours expended, they are recorded on the job card. At a later stage, an overhead allocation can be made to arrive at the total cost of production.
Define production report
Production reports are documents which are used to report results of production, output, wastage loss, etc., at identifiable stages or completion of production or for specific cost centres.
Define costing schedule
A costing schedule is used to identify and quantify all the costs which it is anticipated will be incurred in manufacturing the company’s products. It is in effect a “budget” against which actual production costs can be measured.
Define transfer to finished goods note
This document records the transfer of manufactured goods from the production department into the finished goods stores.
Define picking slip and delivery notes
You will recall from the revenue cycle, that these documents are used to select goods ordered from the warehouse and to assist in controlling the movement of goods once they have been sold.
Define inventory sheets
This is a document that is used during an inventory count. The inventory sheet will usually contain a description of each item of inventory, its location in the warehouse, and a column into which the quantity of items actually counted, can be entered. The document will usually also contain a column for entering
the cost of the item and a column into which the extension of quantity × price can be entered,
Define inventory tag
An inventory tag is a small, numerically sequenced cardboard (or similar) tag, which is attached to the different types of inventory before an inventory count. It will be in two distinct, but identical parts which will each contain a tag sequence number, the inventory number and description, and an empty block into which the quantity of inventory on hand will be entered as the inventory item is counted. When the first
counting team has counted the number of items for that particular inventory item, they will enter the number in the quantity block of one part of the inventory tag. They will then remove that part of the tag and hand it to the count controller. The second count team will perform a second count and follow the same procedure. The count controller will match the two parts of the inventory tag and any discrepancies
will be recounted. This results in an accurate inventory count.
Define inventory adjustment form
The inventory adjustment form is a sequenced document which is used to record adjustments which must be made to correct the perpetual inventory records when actual inventory and theoretical inventory (per the perpetual inventory records) do not agree, for example an inventory item which has been stolen will result in the actual “quantity on hand” being less than the “quantity on hand” recorded in the perpetual inventory records. When this is discovered (by counting the inventory), the perpetual inventory records must be corrected.
