Republic of the Philippines
Catanduanes State University
COLLEGE OF BUSINESS AND ACCOUNTANCY
Virac, Catanduanes
ACCTG6: Accounting Information System
Group Activity 7.1:
PRODUCTION CYCLE
McDonald’s
Group 5:
Tan, Ma. Faith
Taraya, Krizel
Tenoria, Erica
Tevar, Cyr Ernest
Tianela, Kristele Jean
BSA - 2A
SALLY MORALES
Professor
I. INTRODUCTION
McDonald's Corporation is an American fast food company, founded in 1940 as a
restaurant operated by Richard and Maurice McDonald, in San Bernardino, California, United
States. McDonald's is the world's largest restaurant chain by revenue, serving over 69 million
customers daily in over 100 countries across 37,855 outlets as of 2018. Although McDonald's is
best known for its hamburgers, cheeseburgers and French fries, they feature chicken products,
breakfast items, soft drinks, milkshakes, wraps, and desserts. In response to changing consumer
tastes and a negative backlash because of the unhealthiness of their food, the company has added
to its menu salads, fish, smoothies, and fruit. The McDonald's Corporation revenues come from
the rent, royalties, and fees paid by the franchisees, as well as sales in company-operated
restaurants. According to two reports published in 2018, McDonald's is the world's second-
largest private employer with 1.7 million employees (behind Walmart with 2.3 million
employees). As of 2020, McDonald's has the ninth-highest global brand valuation.
McDonald’s has a well-established Product Life Cycle (PLC) that studies the success of
their new additions or re-introduced menu options, which contributes to the information needed
in assuming their production cycle, thus results enables the company to establish the production
count that best suit the product, therefore, reducing losses and full consummation of product
minimizing spoilage.
Before the cycle starts, a product begins with an idea. The idea undergoes brainstorming
and R&D or market research and development. In this early stage, small experiments and model
variations are done. Sometimes, surveys and interviews are conducted instead. Think of this
stage as the pre-conception point of a product. Sometimes, the experiments will lead to failure or
non-profitable ends. If in the experiments, the product is found to be feasible and profitable, the
product then starts entering the product life cycle, thus then be included in the production cycle
through years and years of service.
McDonald’s uses a production process called streamlining. It becomes an assembly line.
Every step and movement of labor is pre-arranged scientifically in order to avoid any mistakes.
From beginning to end it is a well working streamlining process. Workload is divided into
various steps that enables worker focus on one task assigned to them, minimizing casualties such
as error in assembly.
II. DISCUSSION
A) Business activities and the key decisions to be made in the production cycle.
McDonald's primary generic strategy is cost leadership. Providing low priced products that
entices customers and is also a factor to those customers in coming back to purchase again. A
key factor in the success of McDonald’s is its ability to appeal to a wide range of customers.
McDonald’s established a global advisory council to provide expert guidance on nutrition and
well-being. To satisfy health-conscious customers, the fast-food company began to include high-
quality choices on the menu. Also, in various countries McDonald’s offers a specialized menu
options that appeal and befall on the standards of the country in terms of religious beliefs, tastes
and also monopolizes the country’s prime products as its highlight options. McDonald’s has
made convenience a key factor in its success, according to Jim Nelson’s study. Restaurant
locations are so prevalent in suburban towns and cities that you are never more than a few
minutes away by car or by foot. Shopping centers and strip malls generally have a McDonald’s
included or within walking distance. Some stores have positioned McDonald’s restaurants inside
for customer availability.
B) Analysis of the production cycle using the documentation tools such as context diagram,
DFD, document flowchart and the business process diagram.
Supplier
Food Ordering
Customer Kitchen
System
Manager
Context Diagram
DFD
Document Flowchart
Business Process Diagram
C) Threats and control procedures.
General issues throughout entire production Cycle:
1. Inaccurate or invalid master data
a. Data processing integrity controls
b. Restriction of access to master data
c. Review of all changes to master data
2. Unauthorized disclosure of sensitive information
a. Access controls
b. Encryption
3. Loss or destruction of data
a. Backup and disaster recovery procedures
Product Design
4. Poor product design resulting in excess costs
a. Accounting analysis of costs arising from product design choices
b. Analysis of warranty and repair costs
Planning and Scheduling
5. Over-and underproduction
a. Production planning systems
b. Review and approval of production schedules and orders
c. Restriction of access to production orders and production schedules
Production Operations
6. Theft of inventory
a. Physical access control
b. Documentation of all inventory movement
c. Segregation of duties-custody of assets from recording and authorization of removal
d. Restriction of access to inventory master data
e. Periodic physical counts of inventory and reconciliation of those counts to recorded
quantities
7. Theft of fixed asset
a. Physical inventory of all fixed assets
b. Restriction of physical access to fixed assets
c. Maintaining detailed records of fixed assets, including disposal
8. Poor performance
a. Training
b. Performance reports
9. Suboptimal investment in fixed assets
a. Proper approval of fixed asset acquisitions, including use of requests for proposals to
solicit multiple competitive bids
10. Loss of inventory or fixed assets due to fire or other disasters
a. Physical safeguards (e.g. fire sprinklers)
b. Insurance
11. Disruption of operations
a. Backup and disaster recovery plans
Cost Accounting
12. Inaccurate cost data
a. Source data automation
b. Data processing integrity controls
13. Inappropriate allocation of overhead costs
a. Time-driven activity-based costing
14. Misleading reports
a. Innovative performance metrics (e.g. throughput)
III. LESSONS LEARNED
