Chapter 7 : Conversion Business Process

Conversion means

transforming raw materials into finished goods

The conversion process includes business activities related to

maintaining inventories of raw material and finished goods, producing finished goods from raw material, tracking direct labor and direct equipment costs, and applying overhead.

The conversion process generates

accounting transactions to record the transfer of raw material to work-in-process and work-in-process inventory to finished goods.

the conversion process must also account for

direct labor and other direct costs incurred in determining the cost of goods manufactured.

typical transactions/journal entries resulting from the conversion process.

Sunset’s Graphics Conversion Process

1. When the quantity on hand of a product drops below the minimum level, the item manager authorizes production to increase the

quantity on hand.

2. Based on the bill of material for that item, they issue material into work-in-process.

3. Sunset partners then construct the items.

4. Upon completion, the products are placed in inventory.

Use Sunset’s conversion process to draw a simple business process model using BPMN

• the process starts when Sunset need to replenish finished goods inventory

Lanes with pools could help ___.

clarify responsibilities within a company

Refine the conversion model with lanes