Inventory & production cycle Flashcards
1
Q
purpose?
A
- Safeguard the inventory against theft and damage;
For manufacturing entities: - Control the movement of inventory (raw material, work-in-progress and finished goods) during the production process; and
- Control the production process itself (e.g. what and how many to manufacture, spillage during the process and quality of the manufactured goods.)
2
Q
initiate production?
A
- Production must be planned and controlled by means of production schedules
- Raw materials must be transferred from the store to the factory
3
Q
Movement of goods?
A
- Transfer of raw materials from the store to the factory.
- Conversion of raw materials into finished goods.
- Transfer of finished goods from the factory to the finished goods store.
- Includes the protection of finished goods
4
Q
record production and inventory transactions?
A
- Determination and calculation of
production costs and cost units. - Control over inventory balances-
quality and value
5
Q
risks?
A
- Excessive/ incorrect production (v)
- Unauthorised use of inventory (v)
- Production hours not captured (c)
- Theft of raw materials, WIP, finished goods (v)
- Production costs calculated incorrectly (a)
- Carrying value of inventory incorrect (c - if too low, a - if too high)
- Quantities of stock on hand incorrect (v, a, c)
- Inventory deteriorates in value (v)
- Delays in production (v, a)
6
Q
perfect cycle
storing of raw materials?
A
- Raw materials must be stored and protected until required in production.
- Stock should be barcoded onto the perpetual inventory system (rather than
maintaining A4 pieces of paper) - all raw materials purchased and received must be stored and protected until needed in the production process, the goods should be stored
7
Q
storing of raw materials
stock barcoded?
A
To ensure that the physical stock can be checked against the theoretical stock on a frequent basis (weekly) and to ensure that there is a tracking system
8
Q
storing of raw materials
goods be stored?
A
- Stored in a separate isolated area.
- Access to the material must be limited (Only one entrance from within the shop)
- any doors or windows from the outside must be secured
- The shop must have security gate at the entrance that only opens with the press of a button located at the cashier’s counter. It must also have an alarm system for the evenings.
- The shop (salesroom and storeroom) must be protected against fires and there must be fire extinguishers and sprinklers on the premises
9
Q
perfect cycle
production cycle?
A
a. Issuing inventory from the central inventory warehouse to the branches
b. Receipt of inventory at branches
c. Physical control over the inventory at the branches (half-finished goods and half raw materials)
10
Q
production cycle
Issuing inventory from the central inventory warehouse to the branches?
A
- Branch managers/ manufacturing clerk must place an order at the central inventory warehouse by making use of a pre-printed standard raw material requisition (order form)
- The raw material requisition must be prepared in triplicate: 1 copy tp raw material warehouse, 1 copy to accounting department, 1 copy held at warehouse
- warehouse assistant prepares the items and completes a raw material transfer note (issue note) for the materials/ products that must be issued
- A raw material transfer note should be prepared in triplicate: 1 copy to production/ factory, 1 copy help at warehouse, 1 copy to accounting department
- With dispatch, the security guard/head store manager must compare the items being sent with the information according to the raw material transfer note and must not allow that any items leave the premises that do not appear on the documentation and sign as evidence of doing so
- On a daily basis, the warehouse reviewer of the central warehouse must check that all raw material transfer notes refer to and are supported by a valid authorised raw material requisition
- Branch/Production managers must compare their duplicate raw material requisition with the raw material transfer notes received with delivery on a daily basis.
- The warehouse reviewer and the branch/production managers respectively must review the number sequence of raw material requisition and raw material transfer notes and follow up on missing numbers
11
Q
production cycle
receipt of inventory at branches?
A
- branch manager must be responsible for the receipt of the inventory
items from the central warehouse - With receipt the branch manager must: 1. compare the quality and quantity of the items with the issue note and
order form. 2. initial/sign as evidence that it has been checked and corresponds - any deviations between the physical items and the documentation, it must be recorded on the issue note and signed by both the deliverer and the branch manager
- branch manager must keep the issue note and file it with the order form
12
Q
production cycle
physical control at branches?
A
- branch manager must keep records of the inventory on hand. These records must be updated with the issue note and sales invoices
- frequently hold inventory counts on a sample basis (rotate the specific items selected) and compare the counted inventory per item with the quantity according to the inventory records
- internal auditor must perform inventory counts at the branches on a surprise basis and he/she must compare the physical inventory with the inventory records. The branch managers must be held liable for any shortages.
- storeroom of each branch must only have an entrance from within the shop. Any doors or windows on the outside must have security gates/be closed with iron bars.
- Staff must have access to the storeroom, but it is very important that staff make sure that no delivery people or clients go into the storeroom
- The shop (sales area and storeroom) must be protected against fires and there must be fire extinguishers and sprinklers on the premises.
- shop must have a security gate at the entrance that only opens with the press of a button located at the cashier’s counter. It must also have an alarm system for evenings.
- Sales assistants must count the amount of items clients want to buy to ensure that they come out with the same amount of items
- layout of the shop must be designed in such a way that clients must walk past the cashier before they step outside the door
- ecurity guard must be appointed, and all clients’ purchases must be compared with the cash register slip and sales invoice before they may leave the shop
- staff’s packages must be examined when they leave to ensure that they do not walk out with inventory items
13
Q
reason for production process reports?
A
- Daily production: materials used, wastage and down time.
- Report of goods completed per shift, day, week, month.
- Identify any differences from the production schedule.
14
Q
perfect cycle
transfer of goods to store?
A
a. finished goods transfer note
b. stock records
c. cost system
d. determination and calculation of production costs of finished goods
e. additional (for that of a perpetual system)
15
Q
transfer to finished goods store
finished goods transfer note?
A
- Record transfer of manufactured goods from the production division to the finished goods store
- pre-numbered finished goods transfer note must be issued in 3 fold by one of the production foremen and must be authorised and signed by the production manager
- 3 Copies: 1 to finished goods store, 1 remain in own (factory) records, 1 to accounting department
16
Q
Transfer to finished goods store
stock records?
A
Inventory records should be updated to reflect the transfer by an independent accounting personal (accountant).
17
Q
Transfer to finished goods store
cost system?
A
- Unit costs determined by a variety of methods (Process costing, Job costing, Standard costing)
- Each method requires different ways of accumulating costs and unit cost calculations
18
Q
Transfer to finished goods store
Determination and calculation of production costs of finished goods?
A
- Production reports provide information concerning amount of raw materials used in production, labour required to produce goods, and allocation of overheads.
- Production cost will depend on the system in use
- Calculation of production costs must be checked and authorised (signed)
by management.
19
Q
perfect cycle
send finished goods to customers?
A
- PICKING AND DISPATCH OF ORDERS BEFORE THE GOODS ARE LOADED
ONTO THE TRUCKS FOR DELIVERY BY THE DRIVER - delivery
20
Q
send finished goods to customer
picking & dispatch of orders?
A
- approved sales order form is sent to an access-controlled demarcated area of the warehouse where the storemen pack boxes for dispatch and one of the storeman then sends an email to the sales department to confirm receipt of the order. The chief storeman then instructs the packers to pack the order accordingly
- Pre-numbered, pre-printed delivery note is prepared by the storeman responsible and then attached to the packed goods
- chief storeman then compares the physical goods to the delivery note as well as the approved sales order form and checks the quality, quantity and the description is correct thereafter he signs the delivery note as evidence of doing
so. - 5 copies: 2 to client (1 client must sign, 1 client keep), 1 to sales department, 1 remains in warehouse, 1 to inventory clerk
- number sequence of the delivery notes must be checked by the chief storeman (independent person) on a regular basis and outstanding items must be
SALES & RECEIPTS CYCLE
followed up
21
Q
send finished goods to customer
dilevery?
A
- The driver then packs the goods into the delivery vehicle ensuring the goods match the delivery note
- he signs as evidence of doing this
- gatekeeper ensures that all the physical goods have been provided with delivery notes that agree with the delivery note; this can be documented on a gate register or the delivery note.
- client must sign the delivery note as proof of receipt of the physical goods, that the quality, quantity and description match what was ordered and what is on the delivery note
- client keeps one copy and the other copy is returned to the invoicing department by the delivery vehicle
- manager must review number sequence of delivery notes and investigate any missing numbers
22
Q
inventory count
A
