Operational qualification (OQ) and Process qualification (PQ)

Please find the deviation logs for OQ-Operational Qualification and PQ-Process Qualification in the attachment. I agree that we should maintain them from the beginning. But as you said, we should only have “real” deviations in it .

Please circulate the attached files to the key users of all the modules.

Please find the deviation logs for OQ-Operational Qualification and PQ-Process Qualification along with test evidence (for screenshots) for the UAT sessions. Please communicate with Validation or IT team in case of any difficulty.

A meeting has been scheduled on the 4th May, 2013 (Saturday) on the following topics. The details of the location and time along with other necessary information has been described in the following table


Looking forward in seeing you in the session. Please forward this email to others for invitation if necessary and note that following personnel will be responsible for documenting and sending the Issue registers at the EOD to me.

 

Costing is related to the following modules:
Supply Chain ,Inventory Warehouse, Commercial
Sales & Distribution
HR
QAD
Production
Finance
PD

I have the to-be process of only Finance, could you please send me other TO-BE processes to finally see at a glance whether looks inconsistent with costing. Thank you in advance.

Cost Flow in a Manufacturing Company

T Accounts Showing Flow of Cost. The Baton Rouge Chemical Company had the following inventories on September 1 

Raw materials ....                               $40,000 

Work in process — materials             $15,000
Finished goods                                    25,000 

Work in process — labor                    18,000
Work in process — factory overhead . 1 3,500

During the month of September the cost of materials purchased was $100,000, direct labor cost incurred was $90,000, and factory overhead applicable to production was 75% of the direct labor cost. The September 30 inventories were:

Raw materials .... $30,000 

Work in process — materials $12,000
Finished goods 47,000 

Work in process — labor 20,000
Work in process — factory overhead . 15,000

Required: Using three accounts for work in process, prepare T accounts showing the flow of the cost of goods manufactured and sold.

Factory Overhead Rate and Relationship of Cost Elements. A schedule of Cost of goods manufactured shows:
Materials used                             $150,000
Direct labor                                   400,000
Overhead costs                             300,000
Work in process, ending inventory 120,000

Required: (1) The rate of factory overhead to direct labor cost.

(2) The cost of direct materials included in the work in process ending inventory, assuming that the direct labor cost included in the inventory of work in process is $40,000.

High-low point method in variable cost analysis

The high-low method analyzes  a mixed  cost  by  first  selecting  two  observation points  in  a data  set:  the highest  and  lowest  levels of  activity,  if  these points  are within the relevant range. Activity levels are used because activities cause costs to change and not the reverse. Occasionally, operations may occur at a level outside the  relevant  range or distortions might occur  in a normal cost within  the  relevant range. Such non representative or abnormal observations are called outliers and should be disregarded when analyzing a mixed cost.

Next  changes  in  activity  and  cost  are  determined  by  subtracting  low  values from high  values. These  changes  are used  to  calculate  the b (variable unit  cost) value  in  the y = a +bX formula as  follows:

b =[Cost at High Activity Level - Cost at Low Activity Level]/ [High Activity Level -Low Activity Level]

   =[Change  in  the Total Cost/ Change in Activity Level]

The b value  is  the unit variable cost per measure of activity. This value  is multiplied by the activity level to determine the amount of total variable cost contained in total cost at either (high or low) level of activity. The fixed portion of a mixed cost  is  then  found by subtracting  total variable cost  from  total cost.

What are the practical applications of Linear programming?

Linear programming can be used to find optional solutions under constraints.

In production:

• Product  mix under capacity constraints to minimise costs/maximise profits along with marginal costing.

• Inventory management to minimize holding cost, warehousing / transporting from factories to warehouses etc.

Sensitivity Analysis: 

By providing a range of feasible solutions to decide on discounts on selling price, decisions to make or buy.
Blending: Optional blending of raw materials under supply constraints.

Finance: Portfolio management, interest/receivables management.

Advertisement mix: In advertising campaign – analogous to production management and production mix.

Assignment of personnel to jobs and resource allocation problems.

However, the validity will depend on the manager’s ability to establish a proper linear relationship among variables considered.

Concept of relevancy of cost with three examples

Relevant costs are those costs which are pertinent to a decision. In other words, these are the costs which are influenced by a decision. Those costs which are not affected by the decision are not relevant costs.

Examples of relevant costs are:
(1) All variable costs are relevant costs.
(2) Fixed Costs which vary with the decision are relevant costs.
(3) Incremental costs are relevant costs.

Examples of non-relevant costs:
(1) All fixed costs are generally non-relevant.
(2) Variable costs which do not vary with the decision are not relevant costs.
(3) Book value of the asset is not relevant.

Are irrelevant costs sunk costs?

Sunk cost is a historical cost incurred in the past. In other words it is a cost of a resource already acquired. Future decisions in respect of this resource will not be affected by it. Irrelevant costs are not necessary sunk costs. For example, when a comparison of two alternative production methods using the same material quantity is made, then direct material cost is not affected by the decision but this material cost is not sunk cost.

Sunk costs are costs that have been created by a decision made in the past and that cannot be changed by any decision that will be made in the future. For example, the written down value of assets previously purchased are sunk costs. Sunk costs are not relevant for decision making because they are past costs.

But not all irrelevant costs are sunk costs. For example, a comparison of two alternative production methods may result in identical direct material costs for both the alternatives. In this case, the direct material cost will remain the same whichever alternative is chosen. In this situation, though direct material cost is the future cost to be incurred in accordance with the production, it is irrelevant, but, it is not a sunk cost.

Relevant cost meaning

Costs which are relevant for a particular business option, which are not historical cost but future costs to be associated with different inputs and activities related a business process. Actual, current or historical costs may be used for estimating the future costs of each alternative choice

Relevant cost in decision making process : In business operation, there may be alternative choices of doing things. The management accountant has a great role in the dicision making process of which one out of the alternatives is most profitable, keeping in mind of its technical fasibility. In the planning process of future business operation, these decisions are taken into consideration.

The contribution approach, coupled with the ability to distinguish between relevant and irrelevant costs will prove to be a boon for the managers in arriving at correct conclusions in the challenging area of decision making.

Following two conditions need to be satisfied for a cost to be called a relevant cost:-

1. Occur in the Future - every decision deals with selecting a course of action based on its expected future results

2. Differ among the alternative courses of action - costs and revenues that do not differ will not matter and will have no bearing on the decision being made.

For example, while considering a proposal for plant replacement by discarding the existing plant, the original cost and the present depreciated book value of the old plant are irrelevant as they have no impact on the decision for replacement just going to be taken place. However the expected sales value of the discarded plant is relevant, as it just goes to reduce the amount of investment to be made in the new plant and so it has an influence on the decision. Moreover, outcome of the investment is also taken into consideration for decision making.