Reference no: EM133380935

Case Study: Choo Choo Enterprises is a manufacturer of toy trains known as Choo Choo Toy Trains in toy stores and hobby shops across Asia. The company employs 160 people at its head office and its only production and storage facilities, both of which are located in Indonesia. The following is the production cycle of Choo Choo Enterprises:

The inventory storeroom is known as the Stores Department, and is managed by Elisa. Raw materials (raw materials) and finished goods (finished goods) are maintained in this area, as well as supporting inventory records. Elisa conducts daily reviews of existing items by monitoring the inventory subsidiary ledger and determining whether additional materials are needed. If additional materials are needed, Elisa prepares a material requisition form to be submitted to the Production Planning Department.

The Production Planning Department is led by Andika. After receiving the material requisition form from Elisa, Andika submitted the form. Andika's file contains not only the material request form received from Elisa, but also the sales forecast received from the Sales Department. These files are monitored daily; if there is a match between the needs identified by the store and sales, a bill of materials and routing slip is prepared and forwarded to the Production floor. If the amount of inventory for supporting materials is sufficient, then a production schedule is made and forwarded to the production floor. If materials are needed to support the production of goods, a purchase requisition is prepared and forwarded to the Purchasing Department and Storage Department.

Andika is also a production floor supervisor. After receiving the documents from the Production Planning Department, the bill of materials and Routing Slip are sent to the Storage Department, where Elisa collects the required materials. He makes copies of the bill of materials and Routing Slip and then returns these documents to the production floor along with the requested materials. At the end of the day, Elisa updates the inventory subsidiary ledger and prepares a journal voucher that summarizes the day's materials usage.
On the production floor, supervisors from each production line collect employee timecards at the end of each week and send them to the Payroll Department and Cost Accounting Department. They also prepare weekly job cost reports for the Cost Accounting Department.

Alexander heads the Cost Accounting Department. Alexander uses job cost reports and timecards to create journal vouchers that update the work-in-process and finished goods inventory accounts. As new cost data is obtained, the Cost Accounting Department will continue to collect actual cost data to compare with standard costs. Variations are calculated and compared, and the information is used to evaluate line workers on the production floor, as well as managers and supervisors from each department. Elizabeth is responsible for updating the general ledger every week. Information from journal vouchers is entered into the general ledger program, which automatically updates each account. All journal vouchers are kept in Elizabeth's office.

Question : Explain the Threats and Control that can occur from the process