Question
Little Titan Engines (LTE), Inc., is a manufacturer of a range of small high-quality gasoline engines that are installed in various types and brands of
Little Titan Engines (LTE), Inc., is a manufacturer of a
range of small high-quality gasoline engines that are
installed in various types and brands of auxiliary
equipment.
LTE's primary market comprises the manufactures of
small commercial tractors, commercial electric
generators, and construction site water extraction
pumps.
LTE's employs a batch production process whose
inventory management, production planning, and
accounting procedures consist of a combination of
manual activities supported by standalone
(nonnetworked) PC technology. The company is
experiencing production delays and cost overruns. Its
CEO has hired your firm to review its procedures and
make recommendations for improving it.
The batch production process is initiated by e-mailed
and hard-copy sales orders received from client
companies. The production planning and control clerk
enters the orders into the digital Production Schedule
from his department PC and prints two hard-copy
work orders. He sends one of these to cost accounting
and the other to the production department.
The production department supervisor enters the work
order into a PC application. The system automatically
creates an open work order record and prints the hard
copy move tickets, and materials requisitions.
The supervisor distributes the move tickets and two
copies of the purchase requisitions to each work center
involve in the production process. Work center
employees exchange the two copies of the material
requisitions for assembly parts and other materials
needed to complete the batch. If additional parts or
materials are needed beyond the standard quantity,
the supervisor issues additional material requisitions. As the production is completed in each work center,
employees record their labor time for each batch on
hard copy job cards, which they send to cost
accounting along with the move ticket. Finally, upon
completion of the batch, the supervisor closes the
open work order file.
The storekeeping clerk files one copy of the material
requisition in the department and updates the raw
materials inventory file from the computer in his office.
The manager then sends the second copy of the
material requisition to cost accounting. At the end of
the day, the manager prepares a hard-copy journal
voucher and sends it to the general ledger
department.
The cost accounting clerk receives the work order and
sets up a WIP account for the batch. Throughout the
production period, the clerk also receives move tickets,
job tickets, and materials requisitions, which she uses
to post to WIP. At the end of each day, the cost
accounting clerk prepares a hard copy journal voucher,
which she sends to general ledger department. The
journal voucher reflects the total value of WIP and
transfers to finished good inventory.
The general ledger clerk receives the journal vouchers,
posts to the appropriate GL accounts and files the
journal vouchers in the department.
Required
C. What risks exist in the system as it is currently
designed?
d. Describe the changes needed to reduce the risks.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
C Risks exist in the system as it is currently designed include Delays in processing sales orders due to manual entry and paperbased workflows Errors ...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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