Ralph Wilson started his machine shop in Santa Ana, CA with a small business loan about 10 years ago. Since then, he has built a thriving business making products for companies such as Boeing, Walt Disney Corporation, and several others. This case describes the process by which Wilson Precision Products (WPP) converts materials into finished products and sells those products to his customers. Although WPP also purchases materials from vendors, that process is not part of this case.

Quotes and Sales. Before WPP's customers place an order, Ralph or another sales manager prepare a quote that specifies prices, delivery times, and any special handling for one or more WPP finished products. Often, customers obtain quotes from WPP's competitors, too. The quote process is as follows: 1) Customers call WPP to describe their requirements, 2) Ralph (or other manager) prepares the design documents, 3) WPP purchasing agents contact vendors if necessary for prices of the materials, 4) Ralph estimates the production labor and overhead costs, and 5) WPP delivers the quote to the customer. If the customers like WPP's prices and terms (and they usually do like them), they place an order. Of course, WPP's vendors don't always have required materials in stock. In that case, Ralph usually advises the customer that he can't meet their requirements and cancels the quote. Customers may place partial orders. In other words, they can order some of the items specified on the quote now and then order the rest of the items later.

Ralph's accounting system combines orders and sales and tracks both by order#. The order is completed and WPP recognizes revenue when it delivers the finished products to the customer. Some of Ralph's customers are notoriously slow in paying their bills, but generally, WPP receives payments from customers within 90 to 120 days. Customers pay in full when they pay, i.e., each sale results in one cash receipt. Customers sometimes combine payments so one cash receipt can apply to many order/sales.

Production (conversion). After WPP receives an order from a customer, Ralph or another supervisor signs one production order for each finished product that the customer ordered. Each production order references the corresponding customer order so Ralph can provides updates to the customer based on the status of production orders. This starts the production process. The inventory manager checks the bill of materials for that finished product and prepares one or more materials issue lists depending on when the materials are needed. For some products, materials are issued multiple times, since not everything is needed at once. The manager then removes the materials from their designated bins and gets them ready for use in production.

As soon as the materials are available, WPP manufacturing employees begin labor operations in accordance with labor plans established for each finished product. Production usually involves cutting, treating, machining, assembly, testing, etc., but the specific steps depend on the particular finished product. Precision machining is characterized by tight tolerances for hard-to-machine materials, so WPP only allows qualified employees to work on each step, i.e., the labor plan specifies the type of employee that can work on that step of the plan. Employees scan their ID cards to record when they start and end work on each production labor step. When production finishes, the manager updates the production order to record that production is complete, and the inventory manager places the newly finished products on designated racks. Each rack holds one finished product so WPP can plan for packaging and delivery. Of course, there are often open racks which do not hold finished goods.

Inventories. WPP maintains a materials inventory required for manufacturing its finished products as stipulated by the bill of materials for each finished product. Each material can be used for multiple finished products. Each entry in the bill of materials is assigned a bill of material number. The materials inventory includes both metallic and non-metallic materials. Materials typical of aerospace machining include lightweight aluminum, hard and temperature-resistant metals including titanium and carbon-fiber composites. For other customers such as theme parks, WPP works with both common and engineering thermoplastics as well as advanced, expensive thermoset laminates. Some government customers need products that require composite materials such as carbon fiber reinforced plastic (CFRP), Kevlar and quartz-epoxy composite. WPP tracks its materials inventory by material # and each material is placed in a separate bin for ease of access. However, some bins occasionally contain no material, and materials may not be in any bin.

WPP also maintains an inventory of finished products, but in most cases, it only produces those products after it receives a firm order from a customer. It tracks its finished products by product #. Over time, WPP works with its customers to develop precise specifications for each finished product. From those specifications, WPP creates a bill of materials that itemizes the materials necessary to create each finished product, although typically WPP establishes its finished products before it creates the bill of materials. The bill of materials specifies the quantity, quality, structural integrity, etc. of each material used for that finished product. Some materials are used in several finished products, and each finished products uses one or more materials.

Production planning. Over time, WPP has developed precise labor plans for constructing each finished product and controlling its labor costs. It implemented its labor plans as a series of control cards for each step in the production process. Each step in the labor plan is assigned a labor plan control #. The labor plan specifies the type of employee that will execute each step, the number of hours required, and the standard labor rate. Each labor plan step involves only one type of employee. Of course, WPP decides on finished products before it establishes labor plans for the products.

Miscellaneous. WPP keeps all employee records in one class. Employee information is recorded before employees they issue production orders, issue material, or work in production. It categorizes employees based on their qualifications to perform particular jobs in the production process. It records materials in its inventory records before they are first issued. It records each finished product in its inventory records before it is first produced. There are some employee types that are not yet specified in labor plans. There are also some employee types for which there are no qualified employees, yet.

Attributes

1.Bill of material #

2.Bill of material created date

3.Bin #

4.Bin location

5.Cash account #

6.Cash account balance

7.Cash receipt #

8.Cash receipt date

9.Cash receipt amount

10.Customer #

11.Customer name

12.Customer accounts receivable

13.Employee #

14.Employee name

15.Employee type

16.Employee wage rate

17.End time for this employee on this labor operation step

18.Finished product #

19.Finished product price

20.Finished product QOH

21.Finished product standard cost

22.Labor operations control #

23.Labor operations date

24.Labor plan control #

25.Labor plan step description

26.Material #

27.Material cost

28.Material description

29.Material issue #

30.Material issue date

31.Material QOH

32.Material special handling instructions

33.Number of employees qualified for this employee type

34.Number of hours to qualify for this employee type

35.Order #

36.Order date

37.Sale date

38.Total sale amount ($) for this order

39.Production order #

40.Production order date

41.QOH of this finished good on this rack

42.Quantity of this finished product ordered on this production order

43.Quantity of this finished product for this quote

44.Price of this finished product for this quote

45.Quantity of this finished product ordered on this order

46.Quantity of this finished product delivered for this order

47.Price of this finished product for this order

48.Quantity of this material issued on this material issue

49.Quantity of this material planned for this bill of material

50.Quote #

51.Quote date

52.Quote total price

53.Rack #

54.Rack location

55.Standard labor hours for this labor plan step

56.Standard labor rate for this labor plan step

57.Start time for this employee on this labor operation step

58.Total actual labor hours for this labor operation step