Production Control and Efficiency

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Questions and Answers

What is one of the primary purposes of a purchase order?

To authorize acceptance of goods (correct)

As a source document for processing employee payroll

To serve as a contract for the sale

To ensure the vendor's compliance with legal terms

Which function does the receiving department NOT perform?

Verify vendor's legal compliance (correct)

Make a receiving report

Check for discrepancies in quantities received

Unpack the received materials

How many copies of a purchase order are typically prepared?

Four

Three

Two

Five (correct)

What essential information is included in a receiving report?

Detailed description of the goods received Signup and view all the answers

What does the materials ledger clerk use the purchase order for?

To notify that materials are on order Signup and view all the answers

What is the primary purpose of the purchase requisition?

To notify the purchasing department Signup and view all the answers

Which of the following is NOT a form used in internal control for materials?

Purchasing ledger Signup and view all the answers

Effective control in production aims to achieve which of the following outcomes?

Maximized manufacturing efficiency Signup and view all the answers

Who primarily heads the purchasing department responsible for procurement?

Purchasing agent Signup and view all the answers

Which of the following is a responsibility of the purchasing agent?

Choosing suppliers based on price and terms Signup and view all the answers

Purchase orders typically require how many copies to be made?

5 Signup and view all the answers

Which function is NOT related to materials management?

Marketing and Sales Signup and view all the answers

What does a purchase request typically contain?

Quantity and description of materials Signup and view all the answers

Which department receives the first copy of the receiving report after materials are ordered?

Accounting department Signup and view all the answers

What is the role of the purchasing department in the receiving report process?

To evaluate the vendor's performance Signup and view all the answers

What is compared to ensure that materials received meet purchase order specifications?

The invoice and receiving report Signup and view all the answers

What document allows the receiving clerk to return excess items to the vendor?

Return Shipping Order (RSO) Signup and view all the answers

Who takes responsibility for the materials once they have been transferred to the storeroom?

Storeroom clerk/storekeeper Signup and view all the answers

If the vendor cannot deliver specified merchandise, what action may be necessary?

Order from another source immediately Signup and view all the answers

What is usually attached to the invoice as evidence of payment for transportation charges?

Paid freight bill Signup and view all the answers

How many copies of the receiving report are typically prepared?

Four Signup and view all the answers

What is the primary function of a bin card?

To show quantities of materials received, issued, and on hand Signup and view all the answers

Which department receives the copy of the Materials Requisition for posting on the Materials Ledger Card?

Accounting department to Materials Ledger Clerk Signup and view all the answers

When materials are returned to the storeroom, what document accompanies the return?

Returned Materials Slip Signup and view all the answers

What accounts for the transfer of costs from materials to the production department?

Work in Process account Signup and view all the answers

What must the bin card quantities agree with?

Materials ledger cards in the accounting department Signup and view all the answers

What type of materials can requisitions be used for?

Both direct and indirect materials Signup and view all the answers

If supplies are not used in the factory, they are charged to which accounts?

Marketing or administrative expense accounts Signup and view all the answers

What is the purpose of the stock ledger card?

To maintain perpetual inventory records Signup and view all the answers

Study Notes

Control of Production

Effective control maximizes manufacturing efficiency and reduces unit costs, ensuring desired inventory levels are met.
Control of materials costs requires accurate estimates both total and per unit, facilitated through a variety of internal control forms.

Internal Control Forms

Important forms include:
- Purchase Requisition
- Purchase Order
- Receiving Report
- Materials Requisition
- Materials Ledger Cards
- Returned Materials Report
- Scrap Report

Functions of Materials Control

Functions are categorized into:
- Purchasing and Receiving
- Storing and Issuing
- Accounting and Valuation

Purchasing Process

Managed by the purchasing department, typically led by a purchasing agent.
Initiated through a purchase requisition from production department heads, detailing specific materials needed.
Purchasing agent must understand suppliers, pricing, and terms to select optimal vendors.

Purchase Requisition

Prepared in duplicate; original goes to the purchasing department, duplicate remains with the requester.
Serves two purposes: notify purchasing and assign accountability for the purchase.
Contains critical information such as quantity, description, and unit price.

Purchase Order

Drafted in five copies for various departments (Vendor, Accounting, Materials, Receiving, Purchasing) as written authorization for vendors.
Acts as a source document for both parties regarding the delivery of goods.

Receiving Department Responsibilities

Accepts and checks delivered materials against vendor packing lists and purchase orders.
Verifies quantities and types, inspects for damage, and compiles the receiving report.

Receiving Report

Documents include purchase order number, account number, supplier details, shipment information, and inspection results.
Prepared in four copies for Accounting, Purchasing, Materials, and a copy for the Receiving Department.

Internal Controls

Comparing receiving reports with invoices ensures materials meet purchase order specifications, supporting solid internal controls over materials.

Payment Process

Payment vouchers prepared by the accounting department, sent to the treasurer/cash department for vendor payment.
Immediate reordering may occur if goods are out of stock or undelivered.

Return Shipping Order (RSO)

Allows for returning excess materials to vendors; prepared in duplicate.

Storeroom Responsibilities

Shift of responsibility occurs when materials move from receiving to the storeroom/warehouse.
Storeroom clerk ensures materials are recorded and properly stored.

Materials Requisition Process

Issued to release materials to requesting departments; can originate from several roles including department heads and production clerks.
Accompanied by a tracking system that includes accounting for materials issued and inventory changes.

Stock Ledger Card and Returned Materials Slip

Stock ledger tracks quantities and prices under a perpetual inventory system.
Returned materials slip is used when excess materials are returned, often due to spoilage allowances or order adjustments.

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Description

This quiz covers the essential aspects of production control, including effective management techniques to ensure manufacturing efficiency. It discusses key elements such as cost control, inventory levels, and the importance of internal control forms. Test your knowledge on how to maintain optimal production processes and respond to deviations.