purchasing and payment portion
Narratives are provided on the next page for several activities the Electric Controls Co.
You are to prepare a document flowchart for the Purchasing & Payments portion only of the Purchasing Cycle. The following requirements apply:
1. The flowchart should be prepared in Excel
2. Follow the flowchart rules that I have supplied.
The file should be named XXX_Flowchart.xlsx, where XXX represents your initials (for example, my file would be named RAR_Flowchart.xlsx. The file is to be submitted using the assignment in Moodle. It is due by 9/17/12 (11:55PM). Penalties for late assignments are noted in the syllabus.
Reminder
Academic Integrity:
Assignments and exams are individual and not group tasks. My expectation is that student submissions for assignments and exams will be COMPLETELY their own work. For assignments, this means both the use of the software involved and the content of the work. You are NOT to ask other students for help regarding the use of software or content.
Note that the above admonishment does not prevent you from coming to me for help. The goal of this class is learning and understanding and turning in an assignment that you do not understand does not accomplish anything. In addition, this does not prevent you from seeking help in writing style and grammar. This means only that the content of the writing must be yours.
If I find otherwise I will assign a grade of ZERO for the assignment or exam (first offense) and if you are caught a second time you will receive an F for the class. Note that in the case of a violation where one student has provided assistance and one student has received assistance, I will hold BOTH students in violation of academic integrity standards and apply the grades I have indicated above. See Section 6 of the student handbook for the UNCA policy on Academic Honesty and Grievance Procedure.
The Electric Controls Company is a firm that manufactures custom electrical control panels for industrial customers. Electrical control panels are larger and more complex versions of the metal box that contains the circuit breakers at your house or apartment. Electrical Controls buys components such as switches, circuit breakers, and relays to assemble these control panels. It uses a job cost system to manage its production process, accumulating direct labor and direct material on Job orders associated with the manufacture of each type of control panel ordered by customers and applying manufacturing overhead to each Job at $16.25 per direct labor hour charged. The narrative description below provides information about its purchasing, payroll and production processes.
Purchasing Cycle
Purchasing agents (in the purchasing department) order all materials for inventory. In order to initiate a purchase, the material must be on the Material Master File and can only be purchased from approved vendors. All purchases are documented on purchase orders.
Vendors
A vendor may be added to the Vendor Master File by completing a “New Vendor” form. This 3-part form is completed and signed by a purchasing agent who keeps the 3rd copy in a pending file and submits the original and 2nd copy to the purchasing manager for approval. After his signature, he forwards both copies to the controller’s office for approval. The controller indicates her approval on the form and the cost accountant adds the vendor to the Vendor Master File by keying in the vendor name, street address, city, state, zip code, phone no., and primary contact from the “New Vendor” form. The system automatically assigns the vendor number based on a sequential algorithm. The cost accountant sets up a vendor file for payments and places the original “New Vendor” form in a permanent folder in the file and returns the 2nd copy to the purchasing agent with the vendor number assigned. The purchasing agent matches the 2nd and 3rd copies of the “New Vendor” form and destroys (shreds) both copies.
Either the accounting or purchasing department can initiate changes to the Vendor Master File (name, address, phone number, contact). The initiator uses a 3-part “Vendor Change” form, which must be approved by both the purchasing manager and the controller. The document flow is the same as the “New Vendor” form, except that the initiator may be either from the purchasing or accounting dept.
Parts
Materials are added to the Material Master File using a “New Material” form. The production manager initiates this 4-part form. He keeps the 4th copy, and sends the remainder of the form to the purchasing department. A purchasing agent obtains three price quotes from vendors for the material and returns the form to the production manager, who sets the standard cost for the material. He keeps the 3rd copy (matching it with his previous copy) and forwards the original and 2nd copy to the controller’s office. The controller approves the addition and standard cost and the cost accountant adds the material to the Material Master File by inputting the material description, category (circuit breaker, connector, relay, sheet metal, switch, or wire), and standard cost from the form. The system automatically assigns the material stock number using a sequential algorithm. The cost accountant adds the material stock number to the form, returns the 2nd copy to the production manager and sends the original to the inventory department so that they can prepare a stocking location for this part. The inventory department files the form by inventory category, then numerical order by material stock number. The production manager matches the 2nd copy with the 4th copy he retained earlier and destroys (shreds) both copies.
Purchasing & Payments
The inventory department initiates materials purchases using a “Materials Requisition” form. These are 3-part pre-numbered forms and only one material can be requisitioned on each form. The inventory department keeps the 3rd copy (filed numerically), the original goes to the production manager and the 2nd copy goes to the purchasing department. The purchasing department files their copy numerically until they receive the original copy bearing the production manager’s approval. The purchasing manager matches the original and 2nd copy and assigns a purchasing agent who selects and contacts a vendor and prepares a purchase order. A purchase order to any one vendor may be for multiple requisitions (materials). The purchase order is prepared on-line by entering the vendor number, material stock numbers, quantities ordered, prices, and expected ship date. The system automatically assigns the purchase order number (sequential algorithm), purchase order date (current date) and adds the vendor name/address information as well as the inventory descriptions from the appropriate master files. 3-part Purchase orders are printed daily. The originals are signed by the purchasing manager and mailed to the vendor and the 2nd copy is matched with the appropriate original requisitions and filed numerically. The 3rd copy is matched to the appropriate 2nd copy of the requisitions and returned to the inventory department. The inventory department matches their file copies of the requisitions to the returned purchase orders and destroys (shreds) all documents.
When material is received at the dock, the receiving department verifies that the material matches the packing list attached to the shipment. They then enter the receipt information directly into the system via a computer located in the area. The system automatically supplies the date and time of arrival as well as the receipt number (using a sequential algorithm). Dock personnel then add the purchase order number, the material stock numbers and the quantity received. The packing list received with the shipment is stamped as “Entered” and initialed by the individual who handled the receipt and forwarded to the accounts payable department. The accounts payable department files the packing lists by vendor.
All mail is received by the mailroom and forwarded to the proper department. Vendor invoices are forwarded to the accounts payable department. The accounts payable clerk matches the invoices with the packing lists obtained from the receiving department and inputs the vendor invoice number and price from the invoice for each material received. The clerk then files the invoice (with matched packing lists) into a weekly file by due date. Every Friday, the accounts payable clerk pulls that file of matched and entered invoices due for the week and prepares checks. Checks to vendors may be for multiple invoices and receipts. Checks are prepared on line, with the clerk inputting the vendor invoice number to obtain the information already on file for the receivers associated with the invoice (invoice no., receiver no., quantity received, and price). The check/voucher form automatically extends the receiver information, inserts the check date and assigns the check number based on a sequential algorithm. The clerk verifies that the check amount equals the amounts billed on the vendor invoices before completing the form. The clerk then prints the check/voucher form (a two part document), separates the copies and attaches the invoice/packing list to the second copy, and gives both sets of documents (the original checks and the matched paperwork) to the controller. The controller reviews the documents, signs and mails the checks to the vendors, and returns the matched paperwork to the clerk who files them in the appropriate vendor file in check no. order.
Payroll Cycle
The Electric Controls Company maintains two separate systems for employee data and payroll. One is for all salary personnel and the other is for hourly production personnel. This cycle description relates only to the hourly production personnel. It is a highly automated system using virtually no paper documentation.
All production personnel are interviewed and hired by the human resources department. Requests for additional production employees are made by the production manager on a “Request for Hire Form”, an on-line form for each position to be filled. The form indicates the requested starting date, qualifications required, department assigned and hourly wage to be paid. This updates the Position Available File. The controller, who must approve the hire and hourly wage receives notification through her networked computer that there are new hire requests outstanding. The human resources manager also receives the same notification to alert him that he will potentially have positions to fill. The controller uses her security code to approve them on-line, which updates the file that they are approved and assigns a unique “hiring code” to each position. If she does not approve them within two days both she and the human resources manager receive a second notification. After the controller approves the hire, the human resources manager receives notification on-line (with the “hiring code”) and can advertise to fill the positions. If the controller rejects the new hire, the file is updated with the form classified as rejected and the production manager receives notification of this change. Once rejected, the production manager must create a new form if he wants to have the hire re-considered.
When a new production employee is hired, the Human resources manager updates the Employee File on-line with the new hire’s last name, first name, SSN, address, telephone no., marital status, exemptions, hourly wage, department assigned, and start date. He also enters the “hiring code” for the position being filled, which updates the Position Available File as a filled position. The system assigns an employee no. to the new hire using a sequential algorithm. Once this data has been input, the human resources manager encodes an Employee ID card with the employee’s information and the employee swipes the card through a card reader to insure the information is encoded correctly. On the first “swipe” of the card, the information input by the human resources manager to the Employee File is displayed and the new employee must accept it by entering a self-determined unique 4-digit password. The password is saved to a secure Password File and once input, is required each time the card is used in the future.
In addition, the company pays all employees via direct deposit to their account at the First Bank – where they maintain all their bank accounts. If the new hire already has an account with First Bank, they add this information to their Employee File. If not, the employee must fill out a First Bank “New Account” form. The human resources manager faxes this to First Bank and after two to three days the employee receives a “New Account Kit” directly from First Bank. The employee must then return to the human resources office and use his card and password to update his file with the new account number.
Time worked is accumulated using the Employee ID cards. When the production employees begin their workday they swipe the card in a card reader just outside the production manager’s office and enter their password. This posts the employee no., date and start time to the Daily Time Worked File. The production manager posts a work schedule for the day’s work outside his office, which indicates the workstation assignment for each employee and the jobs orders that they are assigned. Each workstation also has a card reader. All card readers are networked into the system such that data is posted real time. When employees work on specific jobs, they swipe their cards at the particular workstation where they are stationed for the day, enter their password, and enter the job number. This updates the Daily Time Worked File with the start time for the job and the system assigns a unique sequence number to the work. When they complete the work for that job, they swipe their card again and enter their password – the system asks them if they wish to complete their work on the current job they have in process – entering yes posts the completion time to the job to the Daily Time Worked File. The employee then has the opportunity to enter another job number if they are beginning work on another specific job. The next job the employee works on is assigned the next sequence number. As the day progresses, the system automatically allocates the time worked to regular and overtime categories based on the time already accumulated by the employee for the day and pay period.
At the end of the day, the employee swipes the card at the card reader by the production manager’s office, enters his password and indicates that he has completed work for the day. The computer screen displays the detail of all time worked for that day, including time charged to jobs. The employee can edit the job information if it is incorrect (including adding, deleting, or changing job numbers), but cannot change the total time worked – any edits update the Daily Time Worked File. The employee must indicate his review and approval of the day’s time by affirmative response to the question posed by the system in order to sign-off for the day. Each day the production manager reviews each employee’s time and indicates his approval using his security code. The production manager has the ability to edit the actual time worked and job information, as well as the category of time (regular vs. overtime). The system tracks all edits made to the file by either the employee or production manager in a separate Time Edit File. Once the production manager has approved the day’s information the Daily Time Worked File is updated as “released”.
Every evening the system automatically queries the Daily Time Worked File and summarizes the released job information, posting it to a Time Worked File. Data posted to the Time Worked File includes employee no., pay period ended (calculated by the system from the date worked), total hours worked (with overtime hours multiplied by 1.5 before accumulating them in the total), sequence no., and job no. This file is needed for the production reporting system.
Every Monday, the payroll clerk reviews the Daily Time Worked File on-line to insure that every employee’s time has been released for the previous week (the payroll period is Monday to Friday, with payment occurring the following Friday). If there is unreleased time the payroll clerk contacts the production manager to complete the approval process. Once all time is released, the payroll clerk runs a query for the payroll time period she inputs that summarizes and transfers the necessary data to calculate the payroll to the Payroll File. The records summarized and transferred are also cleared from the Daily Time Worked File to a Time Worked History File. The Payroll File summarizes the regular and overtime hours by employee no. for the payroll period, matches the employee no. to the Employee File and obtains the wage and tax information from that file in order to calculate gross and net pay, as well as the employee’s SSN and bank account number. The payroll clerk reviews the payroll register on-line and informs the controller that the payroll is ready. The controller reviews the payroll register and if satisfied transfers the payroll data (Employee name, bank account number, net pay) to the bank via electronic exchange over phone lines. The bank returns a file to indicate the data was accepted and this updates the Payroll File with the date paid information. The bank automatically deducts the net pay from the company bank account and deposits the net pay into each employee’s bank account by 7:00AM Friday morning.
Revenue Cycle
Details of Electric Controls revenue cycle are not included. It should be noted however that this cycle includes the maintenance of a Customer File, which includes the following data: customer no. (system generated using a sequential algorithm), customer address, and customer telephone number. The sales department maintains this file.
Production Cycle
The company builds control panels to suit customer needs, so it adds information to its Finished Goods File as customers request new specifications. The part numbers are not customer specific however as one customer may order a panel which is similar to another customer’s specifications so the same item code will be used for both customers. The production manager maintains the Finished Goods File. When a customer orders a new specification the production manager prepares a “Finished Goods Master Specification” form (2-part), which details the materials required and assigns a product name. He inputs the new product on-line into the Finished Goods File, which assigns the next sequential item code, and then manually copies the assigned item code to the form. He keeps the original, which he files by product name, and forwards the second copy to the sales department, which keeps its own file by product name.
The production manager receives copies of all customer orders from the sales department. He creates a job order for each type of control panel on a sales order (a sales order may contain multiple control panels). To create a job order, he pulls the “Finished Goods Master Specification” form for the particular control panel ordered (or creates one as per above if it is a new control panel) and inputs the following using an on-line form (which updates the Job Order File): job order date, expected job completion date, customer no., item code, and each of the direct material stock numbers and quantities needed to assemble the panel. The job order number is assigned by the system using a sequential algorithm.
Once the job order is prepared, the production manager schedules the production employees as necessary to complete the jobs. Employees are responsible for obtaining the direct material they need to perform their work. They fill out an “Inventory Requisition” form (2-part) that includes the job order no. and direct material requested, have the production manager approve it with his signature, and take it to the Inventory department. The inventory department provides the production employee with the material, the production employee signs the form to indicate agreement with the quantity received. The inventory department keeps the original copy of the form and the second copy is forwarded to the accounting department. The inventory department inputs the actual quantity of material issued to the job order on-line.
Production employees record their time worked to the jobs as described in the payroll cycle.
When a job is complete, the production manager completes the job order in the Job Order File by inputting the actual completion date. When all job orders issued for a particular sales order are complete, the production manager informs the sales department that the order is ready for shipment and moves the finished product to the shipping area.
