The production cycle is a
recurring set of business
activities and related
information processing
operations associated with the
manufacture of products.
Four basic activities in the
production cycle:
1. Product design,
2. Planning and scheduling,
3. Production operations, and
4. Cost accounting.
• How the production cycle is linked to the other subsystems in a company’s information system
Production Cycle Information System
• Enterprise Resource Planning (ERP) that supports an organization’s production cycle.
Product Design
The product design activity creates two outputs.
1. Bill of materials
2. Operations list
Example: Bill of materials Example: Operations list
Threats and Controls
Planning and Scheduling
The second step in the production cycle is planning and scheduling . The objective is to
develop a production plan efficient enough to meet existing orders and anticipated short-
term demand while minimizing inventories of both raw materials and finished goods.
Two common methods of production planning are :
1. Manufacturing resource planning and
2. Lean manufacturing.
Threats and Controls
Production Operations
• The third step in the production cycle is the actual manufacture of products. The manner in which this activity is accomplished
varies greatly across companies, differing according to the type of product being manufactured and the degree of automation
used in the production process.
• Computer-integrated manufacturingg (CIM) - A manufacturing approach in which much of the manufacturing process is
performed and monitored by computerized equipment, in part through the use of robotics and real-time data collection of
manufacturing activities
Cost Accounting
• The final step in the production cycle is cost accounting.
• The three principal objectives of the cost accounting system are
1. to provide information for planning, controlling, and evaluating the performance of production operations;
2. to provide accurate cost data about products for use in pricing and product mix decisions; and
3. to collect and process the information used to calculate the inventory and cost of goods sold values that
appear in the company’s financial statements.
• Job order costing
• Process costing
• Activity-based costing
• Throughput
• Quality control measures. (The ultimate objective of quality control is to “get it right the first time” by
manufacturingg products that meet customer specifications. )
Threats and Controls
The Human resources management (HRM)/payroll cycle is a recurring set of business activities and related data
processing operations associated with effectively managing the employee workforce. The more important tasks
include the following:
1. Recruiting and hiring new employees
2. Training
3. Job assignment
4. Compensation (payroll)
5. Performance evaluation
6. Discharge of employees due to voluntary or involuntary termination
HRM/payroll cycle information system
Overview of HRM process and information needs
• How many employees does the organization need to accomplish its strategic plans?
• Which employees possess specific skills?
• Which skills are in short supply? Which skills are in oversupply?
• How effective are current training programs in maintaining and improving employee skill levels?
• Is overall performance improving or declining?
• Are there problems with turnover, tardiness, or absenteeism?
Knowledge management systems
Payroll Cycle Activities:
• Update payroll master data
• Validate time and attendance data
• Prepare payroll
• Disburse payroll
• Disburse payroll taxes and miscellaneous deductions
Update payroll master data:
The first activity in the HRM/payroll cycle involves updating the payroll master database to reflect various
types of internally initiated changes: new hires, terminations, changes in pay rates, or changes in discretionary
withholdings. In addition, periodically the master data needs to be updated to reflect changes in tax rates and
deductions for insurance.
VALIDATE TIME AND ATTENDANCE DATA
• Time Card
• Time Sheet
Prepare Payroll
Process:
• Edit payroll transaction data
• Validate transactions
• Sort transactions by employee number
• Merge payroll transaction files (if multiple divisions)
• Read payroll master file and transaction records
• Calculate gross pay (hourly wages, overtime, bonuses, or salaried fraction)
• Sum payroll deductions (tax withholdings and voluntary deductions)
• Subtract total deductions from gross pay to determine net pay
• Update year-to-date records for gross pay, deductions, and net pay
• Create payroll register (listing gross pay, deductions, and net pay)
• Create deduction register (listing voluntary deductions)
• Print employee paychecks or process direct deposits
• Generate earnings statements with gross pay, deductions, and net pay details
• Allocate labor costs to general ledger accounts based on job-time ticket codes
• Maintain running totals of labor cost allocations
• Prepare summary journal entry for general ledger posting
• Produce detailed payroll and deduction reports for internal use and government
compliance
Voluntary Employee Deductions
Employers must pay Social Security and unemployment taxes, ensure accurate payroll deductions, and may
contribute to employee benefits like insurance and retirement plans. Flexible benefits plans increase
HRM/payroll system demands, especially for large companies managing inquiries. Providing HRM/payroll
access via intranets helps streamline these processes.