P-MACC : Production Management Accounting and Cost Control

P-MACC The Objective of this system is to optimize the production so as to be able to produce a given product in the shortest time at the lowest cost possible. The trade-off between cost and speed is a factor to be determined by market demand conditions and constraints of physical resources both human and equipments. In order to achieve this goal two major disciplines are called upon. Each discipline requires specific modules developed by our team at Computec :

THE TECHNICAL AND ENGINEERING know-how to quantify the demand for a product and the manufacturing requirements for that product and put them in an orderly manner to allow us to obtain its standard cost and the time and resources required to produce it. This involves the following modules :

Demand Forecasting: The optimisation of the quantities to be produced so as to minimize the quantities on hand without hitting stockouts situations depends to a great extent on being able to forecast the demand for a finished product.

Inventory Management: The first step in the setup of a production control system is to establish the theoretical and technical information pertaining to the planning and execution of a given manufacturing process needed to produce a finished goods item. This will require a thorough knowledge of the various steps required to manufacture the product , the ingredients or component/sub-component makeup and the various manpower , machinery and economic factors which have to be taken into consideration. At Computec we have developed the following modules to perform this job :

Product Data Management:

Bill of materials: This module itemizes the various raw ingredients which make up a product including the quantity required, machines used, manpower and skill. It also defines the manufacturing routing which details the various manufacturing steps required and their sequence. And it gives the work center information which describes the machines used in the manufacturing process.

Standard cost: Once this data has been setup for a given product (based on previous production data as well as some estimates) the model can be used to obtain the standard cost per unit of finished product.

Material Requirements Planning: Whenever a product is to be manufactured,the required quantity is fed into the Bill of Material Model and the required quantities from each item are generated (detailed to the most elementary item). The generated list is then compared to the actual quantities on hand and on order. Any shortages are pointed out. Whenever needed an implosion list is produced in order to show for every raw ingredient item all the places where it is used and the quantity required per unit of finished product.

Resource Loading and Capacity Requirements: This module maintains data about the various work centers ( machines and their capacities, numbers and availability ). It also maintains a list of all the skills required in the manufacturing process plus the total manpower availability in each skill category. While generating the explosion Bill of materials the system will also generate the corresponding requirements for the manpower and equipment loading. The system will produce reports detailing the total load per machine and equipment center and the total required manpower per skill. This data is necessary to complete the planning phase of the production.

Standard Costing Variances and Cost Control: The BOM model is used by the technical (production) as well as the marketing and cost accounting departments. The technical people use it as a control yardstick to compare the actual material usage, manpower utilization and equipment usage against the standard computed figures in the model. Any deviations from the standard will then have to be attributed to either production irregularities or an actual poorly estimated figure in the model. While the cost accounting department uses this model to compute the standard cost of the product, feed it into the accounts. The actual cost figures collected from the job orders material consumption and manpower and equipment utilization are also compared to the computed standard cost and any variations are again examined for causes and are posted into the over/under applied accounts.

THE ACCOUNTING AND COST CONTROL function around which all the sales cost and profit related activities are centered to produce a company level budgeting, forecasting reporting and control. Here a combination of integrated computer modules can be introduced in order to feed the inputs which are processed to provide the analysis of the real and detailed costs which go into the manufacture of a given product. Depending on the particular industry under consideration some of these modules may be of less significance than others and their output may be prepared manually and input to the overall system in the form of journal voucher. Most of these modules come in free standing form and can be integrated together whenever the other modules are implemented :