Download Flowchart 1

Major Information Flows in the Production Cycle
This is a system flowchart of the Production Cycle. It is where the goods are being produced.
Notice that the cycle consists of 3 inventory divisions: Raw Materials, Work-in-Process, and
Finished Goods. All the files in the cycle are master files. These files: 1) Raw Materials, 2)
Work-in-Process, and 3) Finished Goods, are shown on the Balance Sheet in the Financial
Statements, and show how fast things are selling. This flowchart shows the positioning of the
Production Business Process (inside the box) as it interfaces with the Revenue
(Sales/Collections) Business Process, the Purchasing (Acquisitions/Payment) Process, and the
Planning/Control Process.
Reading from the flowchart, we start with the Sales Order, which is where the demand for the
product begins. The information on the Sales Order is transferred into a Production Order that is
input into the online process of Production Management. The Production Management uses the
production order to authorize and begin the production process. You can see the production
process interfacing with work in process inventory.
From the Purchasing Cycle, the Receiving document consists of direct and indirect materials that
will be input into the Raw Material inventory file. The Time card or Labor ticket consists of
direct and indirect labor costs that are input into the Cost Accounting process and the Work in
Process inventory file. An example of indirect costs may be overhead.
The Raw Material inventory file is a master file that is being read by the Raw material inventory
Management Process. It is being read to see if materials are needed or not for the production. If
materials are needed, then a Purchase Order is made. A status report document also comes out
from the Raw material inventory file.
The Cost Standard document is from the Planning and Control Cycle. It is being input into the
Standard Cost file. Standard Costs may be a wide range of things, such as, dimensions or how
much materials should cost. The Standard Cost file is used in the Cost Accounting process. So is
the Raw Materials inventory file. This is where all the calculations take place. And what comes
out of the Cost Accounting process is the Cost Activity or Standard Cost Variance report.
Output from the Cost Accounting process is entered into the Work-in-Process inventory file.
What comes out of the file is a Work-in-Process status report document. Work in Process is
input into the Completion of Production process. As a result, a Finished Goods inventory file is
produced from the Completion of Production process. If there are any problems, production
proceeds to the Finished Goods Inventory Management Process. The problems are sent to the
production process all over again. If there are no problems, the item is entered into the Cost of
Goods Sold file when sold to the customer. A Finished Goods status report comes out from the
Finished Goods inventory file.