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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.

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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 ... blur-text-image

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