1. Chapter Learning Objectives
1. Identify the activities and documents common to most
conversion business processes
2. Recognize the similarities and differences between
various types of conversion processes
3. Explain the various components of the REA ontology in
the conversion business process
4. Create a REA business process level model for an
enterprise’s conversion process
5. Identify common information needs within the
conversion process
6. Create database queries to retrieve conversion process
information from a relational database
5. Conversion Cycle Events
Economic Increment Event
Production Run; the event that produces a finished product resource
Represents a batch or job in a job-order-costing environment (and may be
labeled as such)
Represents a machine run in a process-costing environment, or some
equivalent time period such as a growing season
Data typically captured include an assigned identifier, starting
date/time and ending date/time of the event, and data as to the
resources and agents involved in the production run
6. Conversion Cycle Events
Economic Decrement Event
Materials Issuance
Represents the using up of raw materials in the production process. Those
raw materials are usually transformed into finished goods and lose their own
identity and nature in the process.
Is usually symbolized by a move ticket or similar document
Data typically captured include date/time of issuance; origin and
destination of the issuance, the underlying production order, and the agents
involved in authorizing it (supervisor) and executing it (inventory clerk)
7. Conversion Cycle Events
Economic Decrement Event
Labor Operation
Represents the performance of a particular activity in the conversion
process by a production employee, thereby using up that person’s labor
Is usually symbolized by a job time ticket or time track form
Data typically captured include the starting and stopping times for the
labor operations and descriptions of the labor operations on a specific date
by a specific employee
8. Conversion Cycle Events
Economic Decrement Event
Machine Operation
Represents the performance of a particular activity in the conversion
process by a machine, thereby consuming part of the machine’s useful
life
Is usually symbolized by an entry on the WIP job ticket
Data typically captured includes the starting and stopping dates and
times for the machine operations, what machines were involved, who
authorized them (supervisor) and who executed them (production
employee)
9. Conversion Cycle Events
Increment Commitment Event
Production (Job) Order
A commitment event that schedules a work-in-process job, committing to a
future increase in finished products
Is usually symbolized by a Production Order number and data such as what
finished good is being produced, what quantity is being produced, who
approved it, the order date and requested completion date. The
production order document may also summarize data such as what specific
labor operations and materials are needed
10. Conversion Cycle Events
Decrement Commitment Event
Raw Materials (or Labor or Machine) Requisition
Is a Commitment event whereby the production commits
to transfer materials from the materials warehouse to the
production floor, thus it commits to a future decrease in
materials (or labor or machinery).
If insufficient materials are on-hand in the warehouse or if
insufficient labor is available, this may trigger activities in
the purchasing or payroll departments; however, those
activities are part of the acquisition/payment and payroll
processes, not the conversion process
Is usually symbolized by a materials requisition document
Data captured typically include the date/time of
requisition and information about the resources and
agents involved in the event
11. Conversion Cycle Relationships
Duality
Transformations are more complex than transfers
found in other processes
Involve materials use, labor use, and equipment
consumption
Often compromised such that only materials use is
tracked directly, with labor and equipment consumption
costs assigned via some allocation scheme
Often labor operations and machine operations are
not maintained separately from work-in-process job
because they are subsumed into the job; relationships
of the production run to the labor type and machine
resources are often maintained
12. Conversion Cycle Relationships
Stock-flow
Materials and labor are typically used up completely
in the material issuances and labor operations; such
stock flows are called Use
Machines are typically only partially used up in
machine operations, such a stock flow is called
Consume
Finished goods are produced by the production run
(similar to inventory being purchased in acquisition
cycle)
Fulfillment
Material issuances fulfill raw material requisitions
Production runs fulfill production orders
13. Conversion Cycle
Relationships
Reservations
Raw materials are reserved for use via the requisition event
Finished Goods are reserved for availability
via the production order
Participation relationships
Typically all agents in the conversion cycle are internal agents
Usually includes a direct association relationship (responsibility)
between production supervisors and employees
14. Conversion Cycle Relationships
Linkages
Between Materials and Finished Goods
Contains information needed for Bill of Materials, I.e., a finished good
is composed of what raw material items (in what quantities)
Between Labor (type) and Finished Goods
Contains information needed for Operations List, I.e., a what labor
operations are needed to produce a finished good
15. Conversion Cycle
Relationships
Reciprocal
Production orders trigger the requisitioning of materials; this
reciprocal relationship represents a schedule of what is to be
produced and what will need to be used and consumed to accomplish
the production.
Custody
Companies often give custody of materials (and possibly finished
goods) to a set of inventory clerks to protect the goods from theft or
other misappropriation
16. Resource Query Types
• Detailed status information at one or more
points in time for each resource instance
• Detailed status information at one or more
points in time for only those resource instances
meeting specified criteria
• Summarized status information at one or more
points in time for all resource instances
• Summarized status information at one or more
points in time for only those resource instances
meeting specified criteria
17. Conversion Cycle Resource Queries
List of machinery owned by an enterprise
Average age of machinery on a specified date
List of raw materials normally stocked by an enterprise
List of finished products normally produced by an enterprise
Average standard cost of labor types for an enterprise
18. Event Query Types
Detailed information about each event instance
e.g., what happened, when and where did it happen, etc.
Detailed information about each event instance that meets
specified criteria
e.g. events of a specified type that occurred during a specified
time period or that occurred at a specified location
Summarized information for all instances of an event type
for a specified time period
e.g. total of the event instances during a specified time period
Summarized information for only those instances of an event
type for a specified time period that meet specified criteria
e.g. average dollar value of the event instances for a specified
location during a specified time period
19. Event Queries
in the Conversion Process
Length of a specific production run
End time minus start time
Average length of production runs during a specific time period
Total number of production runs that occurred at a specific plant
or workstation or during a specific time period
Date and/or time an issuance of materials occurred
20. Agent Query Types
Detailed status information at one or more point in time for each
employee
Detailed status information at one or more points in time for each
employee who meets specified criteria
Summarized status information at one or more points in time for
all employees
Summarized status information at one or more points in time for
all employees who meet specified criteria
21. Conversion Cycle
Duality Relationship Queries
Identification of labor operations related to
one or more specific production runs
Identification of machine operations related to
one or more specific production runs
Calculation of the time taken for a labor (or
machine) operation as a percentage of a
complete production run
Count of the number of raw material issuances
(or labor operations or machine operations)
related to a specific production run
22. Conversion Cycle
Fulfillment Relationship Queries
Identification of unfulfilled commitment
events
E.g. production orders for which production runs have not yet
occurred
Identification of fulfilled commitment events
E.g. material requisitions for which material issuances have occurred
Identification of economic events for which
commitments were not made
E.g. production runs that were not ordered
23. Conversion Cycle
Fulfillment Relationship Queries
Calculation of length of time between commitment and economic
events
E.g. length of time elapsed between material requisition and
material issuance
Identification of causes of economic events
E.g. which production order led to a production run
Identification of results of commitment
events
E.g. which material issuance filled a material requisition
24. Conversion Cycle Reservation Queries
What resources or resource types is a commitment
event agreeing to increase or decrease?
E.g. what finished good or finished good type is a
production order committing to produce?
What quantity of a resource or resource type is a
commitment event agreeing to increase or decrease?
E.g. What quantity of each material type is a material
requisition committing to use up?
What dollar value of a resource or resource type is a
commitment event agreeing to increase or decrease?
E.g. What is the dollar value of the finished goods a
production order is committing to produce?
25. Conversion Cycle Reservation Queries
When did an event commit to increase or decrease a specific
resource or resource type?
E.g. When did a materials requisition commit to using up a specific
material type?
Where did an event commit to increase or decrease a specific
resource or resource type?
E.g. To which materials warehouse location was a materials
requisition issued?
26. Conversion Cycle Participation Queries
Which agent(s) participated in a specified event?
E.g. Which production supervisor authorized a machine
operation?
How many events of a specified type has a
specified agent participated?
E.g. On how many production orders has a production
employee been scheduled to work?
What is the total dollar value of events of a
specified type in which a specified agent has
participated for a specified time period?
E.g. What is the total dollar value of all material
issuances approved by a production supervisor?
27. Conversion Cycle Participation Queries
When did a specified event in which a specified agent participated
occur?
E.g. When was the most recent production order supervised by a specific
production supervisor
Where did a specified event in which a specified agent participated
occur?
E.g. at which location did the most recent material issuance by a specific
inventory clerk occur
28. Conversion Cycle Linkage Queries
What raw materials are needed to produce a specific
type of finished good?
E.g. what ingredients are in chocolate chip cookies
What quantity of each raw material is needed to
produce a specific type of finished good?
E.g. how much butter is in a batch of snickerdoodles
Which finished goods contain a specific type of raw
material?
E.g. which of our cookies contain nuts
What labor types are needed to produce a specific
type of finshed good?
E.g. what types of labor go into a batch of molasses
cookies
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29. Summary
We discussed the conversion process and how it fits in at
the value system and value chain levels
We discussed the extended REA pattern at the business
process level
We examined documents typically used to represent events
and discussed related resources and agents
We examined examples of relational database tables for
the conversion cycle and discussed data input into those
tables
We systematically discussed types of queries for the
conversion process to support decision-makers in various
functional areas
We provided selected examples of queries of various types
