For this module I have done some research regarding the production
cycle. The production cycle itself, is "a recurring set of business
activities and related data processing operations associated with the
manufacturing of products," (Romney and Steinbart, 2003). Ramazani,
Allahyari, Askari and Zanjani (2013), report that the production cycle
includes 4 major activities:
1. Production design,
2. Production programming,
3. Production operations, and
4. Cost accounting.
A business using an AIS will need to have the system properly
configured into the production cycle. According to Ramazani,
Allahyari, Askari and Zanjani (2013), AIS plays an important role in
production design, and most (65-80%) of the costs in this step are
associated with production operations. Using the AIS to explore
production options can influence management decisions and thus
production costs. The production programming activity in this cycle
has to do with designing an efficient method of production that
meets the needs of incoming orders and production capabilities. The
AIS can play a vital role here in efficiently configuring this activity,
and also correctly calculating the costs associated with the different
configurations.
Production operations such as the usage of raw materials, wage rates,
machinery and other expenses must be compatible with the AIS no
matter the method of production. Finally, to effectively calculate
costs, the AIS must provide:
• Provision of data for programming, control and assessment of
production.
• Provision of accurate data concerning End Cost of Goods for
use in decisions related to blending of products and pricing.
• Provision of required data for determining End Cost of goods
finished (ECGF) and Cost of Goods Sold (CGS).
In a survey of manufacturing companies in Zanjan-Iran, Ramazani, et
al., (2013), found that companies that had abandoned modern costing
systems or had production activities in place that were not
compatible with their AIS demonstrated weaknesses in their abilities
to produce "real, trustable and timely information in decision-making
for managers and users."
The main take- away from this article that I got was that in order to
remain competitive, the use of an AIS in manufacturing firms is almost
mandatory. I worked in a dip-stick factory a few years ago that still
entered everything by hand and the production errors were
impossible to fix. I would spend hours tracing lots back through the
shop to their intended purchase order. We would have items being
produced from lots that had expired or shipped - there was massive
amounts of waste. It seems obvious that AIS should be included in
every cycle of production and in every department for maximum
efficiency and cost-savings.
Reference
Ramazani, M., Allahyari, A., Askari, R & Zanjani, F. (2013).
Compatibility of accounting information systems (AISs) with activities
in production cycle. Management Science Letters,3(1), 173-180.
Retrieved from
http://www.growingscience.com/msl/Vol3/msl_2012_301.pdf
