Acceptance sampling is a procedure used for sentencing incoming batches. The most widely used plans are given by the Military Standard tables, which were developed during World War II.
Types of acceptance sampling plans
Sampling plans can be categorized across several dimensions:
Sampling by attributes vs. sampling by variables: When the item inspection leads to a binary result (either the item is conforming or nonconforming) or the number of nonconformities in an item are counted, then we are dealing with sampling by attributes. If the item inspection leads to a continuous measurement, then we are sampling by variables.
Incoming vs. outgoing inspection: If the batches are inspected before the product is shipped to the consumer, it is called outgoing inspection. If the inspection is done by the consumer, after they were received from the supplier, it is called incoming inspection.
Rectifying vs. non-rectifying sampling plans: Determines what is done with nonconforming items that were found during the inspection. When the cost of replacing faulty items with new ones, or reworking them is accounted for, the sampling plan is rectifying.
Single, double, and multiple sampling plans: The sampling procedure may consist of drawing a single sample, or it may be done in two or more steps. A double sampling procedure means that if the sample taken from the batch is not informative enough, another sample is taken. In multiple sampling, additional samples can be drawn after the second sample.
Military Standard 105E (ISO 2859, ANSI/ASQC Z1.4)
The original version of the standard (MIL STD 105A) was issued in 1950. The last revision (MIL STD 105E) was issued in 1989, but canceled in 1991. The standard was adopted by the International Standards Organization as ISO 2859.The tables give inspection plans for sampling by attributes for a given batch size and acceptable quality level (AQL). An inspection plan includes: the sample size/s (n), sample of n items from the batch. Count the number of nonconforming items within the sample (or the number of nonconformities, if more than one non conformity is possible on a single item). If the number of nonconforming items is c or less, accept the entire batch. If it is r or more then reject it. In most cases r =c+1 (for double and multiple plans, there are several values for the sample sizes, acceptance, and rejection numbers).
The standard includes three types of inspection (normal, tightened, and reduced inspection). The type of inspection that should be applied depends on the quality of the last batches inspected. At the beginning of inspection, normal inspection is used. The types of inspection differ as follows:
- Tightened inspection (for a history of low quality) requires a larger sample size than in under normal inspection.
- Reduced sampling (for a history of high quality) has a higher acceptance number relative to normal inspection (so it is easier to accept the batch)
- There are special switching rules between the three types of inspection, as well as a rule for discontinuation of inspection. These rules are empirically based.
Supplier and Consumer Risks
The supplier risk is the risk that a batch of high quality (according to the AQL) is rejected. The consumer risk is the risk that a batch of low quality will be accepted. The military standard plans assure a supplier risk of 0.01-0.1 (depending on the plan). The only way to control the consumer risk is by changing the inspection level.
To be able to manage a company efficiently, one should always have full information about both each particular business process and the whole company. Accounting cannot always provide the top manager with such information, because it focuses mostly on the needs of external entities like tax office. The purpose of the management accounting is to provide full and trustworthy information necessary for making correct management decisions and plans. The management accounting reflects all factual expenses and revenues of the company. So, a top manager can get a clear picture of the company operation and make reasonable decisions. Thus, to solve the management accounting tasks, our company applies a self-made Management Accounting System – MACSYS. This automated system makes it easier to make management decisions, providing the top managers with necessary information in a convenient way.
The MACSYS system automates the business processes, helps control the executive discipline, and enables remote work with the information.
Major tasks the system solves:
- Providing the efficient management tools
- Improving the executive discipline control
- Improving the labor productivity due to reduced document circulation time
- Accumulating the information for further use as a knowledge base
- Optimizing the business processes, automating the mechanism of their execution and control
- Formalizing document circulation processes
MACSYS is an integrated system. The following major modules serve for automating the accounting and management of different company activity facets:
Staff/Organizational Structure Management Module
The module reflects the organizational structure in the automated system. Departments, sub-departments, and positions are formed according to the company’s staff list. According to their authority, the person in charge can change the organizational structure representation in the automated system, modifying the information about departments, sub-departments, and positions, designating the employees on existing positions, setting the amount of their salaries depending on the remuneration scheme.
Production Management Module
The system contains the tools for working with the information about all production process components: customers, projects, developers, and financial documents The module automates all the company’s production process steps:
Customer information Management
Entering the new project information. Dividing the project into tasks. Initial estimating the work load and terms of completion. Assigning the persons responsible for particular tasks according to the company’s organizational structure. Determining all project participants’ rates. Confirming the project work start distributing and giving specific tasks to individuals or sub-departments according to the company’s organizational structure. Assigning authorities and subordination within a project collecting the information about completion of the tasks within a project: the time spent, current direct and overhead costs, the project completion progress. Organizing the reporting system at all organizational structure levels within a project controlling the completion of particular tasks and the whole project Distributing the work among the team members.
Customer Relationship Module
This module is a set of programming interfaces for entering and managing information about our customers. The module has a powerful functionality that the commonly used software tools “Customer Relationship Management” (CRM) normally have, like: Entering, storing, and modifying the private customer information Customer relationship history. The list of project performed for the customer with all related information (work load estimates, project schedule, employees involved, expenses). The customer payment history – the list of invoices submitted and paid Total information on completed, current, and future projects, as detailed as necessary
Revenues/Expenses Analysis Module
The data analysis tools are necessary to the company managers of all levels. Especially important is the financial accounting, because it is the financial analysis that helps determine the company’s financial situation and success.
This module is used by the company’s finance department and provides:
Cost Analysis: This can be a comparative analysis of different managers’ work, analysis of directions, customers, analysis of efficiency of departments, developer groups, individuals, etc
Profit Analysis: The analysis of the profit brought by the activity of particular manager, department or group. The profit of each project group can be also analyzed
Cost-efficiency analysis: The general analysis of profit and costs to find out the cost efficiency of a project, customer, etc
Analysis of profit as an annual percent of the capital invested. The capital is subject to calculation based on the financial analysis data
Accounting and analysis of debts
The financial analysis is a powerful management and decision-making tool. To make the analysis effective, we tried to allow for storage and display of a lot of source information that can be represented as detailed or summary reports
Reporting Module
Apart from the general reports that are usual and regulated, our company’s management accounting allows to create individual reports at the top managers’ request. The management accounting provides data for any kinds of reports and parameters. Each key position has a set of reports necessary for their everyday work:
The task performer is given a form to input the task information. This information will be used for controlling the work completion and calculating the performer’s salary. The Project Leader has access to all their subordinates’ reports and the project summary report
The Top Manager uses the reports on the projects that they supervise, including the Project Leaders’ and developers’ reports, reports on the Customers and the financial operations between the company and the Customers. The Production Department manager gets the necessary data on manpower/material resource distribution for planning. The Personnel Department manager can get reports on the company’s employees/positions. The Financial Department can get reports on direct and overhead costs, relationship with the customers, etc.
Accounting Interfacing Module
One of the main principles of the system is one-time data input, which allows to use the information stored in the system both for the management and accounting. The Accounting Interfacing Module exports the necessary data from MACSYS to the external accounting software.
The major principles that MACSYS abides by are:
- Multi-choice data representation principle
- Accounting rules observance principle
- One-time data input principle
- Configuration flexibility principle
- Management information security and access distribution principle
Our program’s main advantages are:
Using the advanced architecture: Microsoft.Net C#, the high-level development language allowing implementing the business logic quickly. The possibility of remote work from anywhere in the world: the whole functionality is accessible by Internet via a secure channel
Prepayment, full or partial payment for goods and services before they are received by the University in good order or rendered satisfactorily
Purpose of the Policy
Generally, goods and services provided to the University are paid for after receipt. On occasion, it may be necessary to provide a known and reputable vendor with an advance payment (prepayment). This policy describes (A) general provisions regarding advance payments, (B) requirement for Purchase Order notation, (C) submission of invoice, (D) accounting reconciliation, (E) receiving and documentation, and (F) needed approvals.
Detailed Policy Statement
General Provisions
Advance payments or prepayments shall be avoided whenever possible. It is prudent business practice not to pay for goods or services until they have been received in good order or rendered satisfactorily. Also, the University may suffer loss of interest on funds used to make advance payments, especially if delivery of materials or performance of services is to take place at some future date.
Exceptions to the policy may include:
- foreign orders
- high-cost equipment manufactured to meet functional specifications
- books, periodicals and newspapers, including special order items for trade and professional publications
- caterers for food and beverage service for large official functions where caterer requires a deposit
- charges for research expeditions; including deposits and/or reservations for other group transportation and/or expenses
- principal investigators and other research personnel who conduct research using human subjects and pay the subjects a small amount (check for entire amount is paid to the investigator or experiment controller)
- vendors who offer substantial prepayment discounts
- maintenance service contracts
- honoraria
- membership dues
- Seminar and colloquia registration fees
Purchase Order
The total amount of the purchase order shall include the value of the advance payment and a full description of the refund policy.
Invoice
Companies to whom an advanced payment is to be issued must provide an invoice (or written confirmation of total cost, including tax, freight, handling) for the full amount of the advance payment prior to the issuance of the advance payment. Advance payments issued to individuals must be supported by documentation indicating the need for the advance payment.
Accounting Reconciliation
Advance payments issued to companies are charged directly to the unit’s expenditure account. Advance payments issued to individuals are charged to an advance account. The unit’s expenditure account will be charged upon submission of receipts or other supporting documentation.
Receiving and Documentation
Units are responsible for receiving the goods/services associated with the advance payment and for collecting and processing all supporting documentation. This supporting documentation must be forwarded to the General Accounts Payable Office (a sub-unit of Accounting Services in the Financial Affairs unit) when the advance payment is issued to an individual. Upon receipt of the documentation, the unit’s expenditure account will be charged. When the payment is issued to a company, the documentation is retained in the unit.
