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Rea Diagram for Food and Beverage Company

Essay Topic: ,

This integrated REA diagram combines 4 individual cycles together, Revenue cycle indicated in blue shape, Expenditure cycle indicated in green shape, Production cycle indicated in red shape and Human Resource cycle indicated in orange shape.

There are 4 integrated resources divided into 2 types which are tangible and intangible. Tangible resources include ‘Inventory (Raw material)’ , ‘Inventory (Finished goods)’, ‘machine&equipment’ and ‘Cash’. Only intangible resource shown in this REA diagram is ‘Employee time and skill’.There is also one integrated event, ‘Disburse cash’ , which is linked to 3 events, ‘receive raw material’ (Expenditure cycle) , ‘Acquire PPE’(Expenditure cycle) and ‘record time worked’( in Human Resource cycle). According to economic duality , Inventory (Raw material) is increased by ordering and receiving raw material (Expenditure cycle) and decreased by being used in issuing raw material(Production cycle). At the same time, Inventory(finished goods) is increased by producing finished goods(Production Cycle) and decreased by taking day-to-day order and shipping goods to customer.

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Cash resource is increased by collecting payment and is decreased by disbursing to employee as salary and to supplier as payment to ordered goods or PPE.

Revenue cycle The cardinality between two events Take estimated weekly order Confirm&take day-to-day order At this present, F&B has only two customers, its branch retail store and Starbuck. Every week both of them have to send ‘estimated order’ of demanded finished goods for the next coming week in advance so as to let F&B arrange sufficient inventory. Every afternoon F&B confirms and takes day-to-day order from both of the two customers.The ordered goods are going to be shipped tomorrow morning. Collect payment Ship goods to customer Therefore, each ‘take estimated weekly order’ may involve zero ‘confirm&take day-to-day order’ due to cancelling estimated order. And maximum cardinality is many because there can be up to 7 confirmations for each ‘take estimated weekly order’. On the contrary each ‘confirm&take day-to-day order’ may involve zero ‘take estimated weekly order’ due to sudden change in demanded goods, and can maximum involve only one take estimated weekly order’.

confirm&take day-to-day order’ and ‘ship goods to customer’ occur in sequence,therefore there is a span of time which makes minimum cardinality between them be zero. Note that F&B take order and ship goods day by day, so each ‘confirm&take day-to-day order’ cannot relate to more than one ‘ship goods to customer’ . As previously stated, F&B confirms and takes day-to-day order from customers every afternoon, and the ordered goods are going to be shipped tomorrow morning.Therefore, each ‘ship goods to customer’ involves one and not more than one ‘confirm&take day-to-day order’. F&B usually bills customer on 15th of every month and grants its customer 60 days credit term. Moreover F&B has no policy to let its customers install their payment. Consequently, each ‘ship goods to customer’ may involve no ‘collect payment’and can be maximum involve only one ‘collect payment’.

Besides for batch billing, zero cardinality is also allowed for the case that F&B has delivered defected goods or that customer ignores payment.Because ‘collect payment is a sequential event of ‘ship goods to customer’, each ‘collect payment’ has to involve at least one ‘ship goods to customer’ and can be maximum to many ‘ship goods to customer’ for batch billing . The cardinality between event and agent For each event that occurs, there is at least one and only one agent involving for accountability reason. For example, each ‘ship goods to customer’ can be involve one and only one customer, and only one employee has to account for this event.For each employee (agent), ‘employee’ is linked to event with zero minimum cardinality which is allowed for new employees or those who do not directly account for these events, and many maximum cardinality is allowed for those employees who usually take responsibility for these events consistently. For each customer who involves in Revenue cycle, ‘customer’ is linked to event with zero minimum cardinality which is allowed for potential customer ,and maximum cardinality is allowed for close-relationship customer. The cardinality between event and resource take estimated weekly order’ is a commitment event.

It does not directly increase or decrease ‘Inventory(raw material). However, receiving estimated weekly order can trigger warehouse people to set aside at least one raw material or may up to many kinds of material. On the contrary, ‘Inventory(Raw material)’ may relate zero ‘take estimated weekly order’ because there can be some raw material which is never used for producing ordered goods. And the many maximum cardinality is allowed for regularly used raw material.Each ‘take day-to-day order’ and ‘ship goods to customer’ has to involve at least one ‘Inventory(finished goods)’ or can also be multiple inventories. At the same time, each ‘Inventory(finished goods)’ is linked to both ‘take order’ and ‘ship goods to customer’ with the zero minimum and many maximum cardinality. Zero cardinality is allowed for those out-of-demand or new inventories whereas most finished goods may be ordered and shipped several times.

The fact that F&B maintains only one cash account makes actual REA diagram should be presented as following picture cashCollect payment The diagram show that if the company maintain only one cash account, this one cash account has to relate at least one collection of payment. However, we have suggested that F&B should separate cash account for one purpose, so this REA diagram is created on the assumption that there are more than one cash accounts. Collect payment cash According to relationship shown between ‘cash’ and ‘collect payment,’ It shows that each time the company collect payment from supplier, the payment has to be deposited into at least one and only one account.And each ‘cash’ may not relate to ‘collect payment’ if it is an account for salary disbursement. However, if the cash account is opened for collecting payment from customer particularly, it can relate several collections of payment. Moreover, ‘cash’ is a merged resource, zero minimum cardinality should be indicated here. Expenditure Cycle The cardinality between two events Acquire machine &equipment Receive raw material Order raw material Disburse cash Same as other companies, ‘receive raw material is a result of ‘order raw material’ therefore the minimum cardinality between them is one and zero.

Moreover each ‘order raw material’ may not lead to any ‘receive raw material’ if suppliers have no ordered goods available for sale. If supplier approves company’s order, there can be only one ‘receive raw material’ at most. On the contrary, ‘receive raw material’ is a result of at least one occurrence of ‘order raw material’. Since some suppliers usually deliver ordered goods in batch ,each ‘receive raw material’ can be a result of multiple orderings. Each time company receive ordered raw material, company may not disburse any cash if supplier delivers free sample goods.And ‘disburse cash’ can happen at most only one time because suppliers do not allowed company to install payment. Since some supplier usually bill F&B monthly, each ‘disburse cash’ can be up to multiple occurrences of ‘receive raw material’.

Note that ‘disburse cash’ is integrated event therefore minimum cardinality indicated in red is zero which means that each occurrence of ‘disburse cash’ can relate to either ‘receive raw material’ or ‘acquire machine & equipment’. Besides from acquire raw material, the company has to disburse cash so as to invest new machine and equipment such as a new oven which has larger capacity.As shown in the picture, each time the company acquires new fix asset, it may relate to zero ‘disburse cash’ due to a span of time and for the case that company exchanges an old machine with a new one, and can be up to multiple of ‘disburse cash’ for installment case. The cardinality between event and resource Receive raw material Order raw material Inventory (Raw material) Each ‘order raw material’ and ‘receive raw material’ has to increase at least one ‘Inventory(raw material)’ and up to multiple inventories.However some raw material may not use to be ordered or delivered because it is under consideration process of company whether to order those new ingredients or not. While basic raw material like flour and sugar are ordered and delivered several times. Disburse cash cash As previously mentioned, we have suggested that F&B should separate cash account base on business purpose.

Therefore each ‘cash’ may not relate to any ‘disburse cash’ , while some cash accounts are opened particularly for disbursement which can relate to multiple of ‘disburse cash’.On the other hands, each ‘disburse cash’ has to relate to one and only one cash account for easy error tracing. Acquire machine &equipment Machine & Equipment For machine and equipment, like raw material, some machines are under consideration process of company whether to buy or not while some consistently used equipment like knives are purchased several times. On the other side, each occurrence of ‘acquire PPE’ has to relate at least one ‘machine&equipment’ and can be up to many. The cardinality between event and agent Employee Supplier Receive raw materialOrder raw material Supplier Each occurrence of ‘order raw material’ and ‘receive raw material’ has to relate to one and only one supplier and employee for accountability reason. On the other hands, each agent is linked to each event with zero minimum and many maximum cardinality. Because some new suppliers may never receive any orders from F&B and therefore never deliver company any goods.

While some close-relationship suppliers always get several orders from company and deliver goods multiple times. Employee (cashier) Disburse cash Supplier Employee (payee)For cash disbursement, F&B has an authorized cashier who directly take responsibility for this event consequently each ‘disburse cash’ has to relate to one and only one and only one ‘cashier’ for accountability reason. Only minimum cardinality of cashier remains one because ‘disburse cash’ is an integrated event among three event, ‘record time worked’ , ‘receive raw material’ and ‘acquire machine&equipment, ’ therefore zero minimum indicated in red is used to describe the relationship which means that each ‘disburse cash’ can relate either to ‘supplier’ or ‘payee’, not both of them at the same time.While each maximum cardinality remains one owing to accountability reason. On the contrary, each agent may never involve zero ‘disburse cash’ especially for new agent ,and most of them relate to multiple of ‘disburse cash’. Acquire machine &equipment Supplier Employee (Production mng. ) Each time of acquiring fix asset, there has to be one and only one production manager involved in order to approve the event and take responsibility.

Same situation happens to supplier.For both of agents, they are linked to ‘acquir machine & equipment’ with minimum of zero and maximum of many. Zero minimums shown from employee and supplier to the event are allowed for new or indirect-related employee and supplier respectively. Two maximum cardinalities are shown the relationship that some direct-related employee and close-relationshiped supplier may account for ‘acquire machine&equipment’ several times. Production Cycle Every early morning production manager gets the ‘production order’ which indicates type and quantity of bakeries to be manufactured in that day.Every ‘production order’ relate to one occurrence of ‘produce finished goods’. For F&B,each ‘ Issue raw material’ can be used for one and only one ‘produce finish goods’.

At the end of the process, if there is some remaining issued raw material, production people has to return it to storeroom immediately. The remaining issued raw material is not used for tomorrow’s production due to quality control. In other words, a new issuing raw material is required for every new start of production.Thanks to the professional production manager, after production people have issued requested raw material, the production manager checks quality and quantity of those issued raw material before starting manufacturing process which makes the issued raw material fit to day-to-day production, only little raw material left. The cardinality between two events Issue Raw material Produce Finished Goods As mentioned, each time production people issue raw material, it can relate to not more than one time of producing finished goods. The zero minimum cardinality is allowed for a span of time due to being sequential event.On the contrary, each ‘produce finished goods’ required at least one ‘issued raw material’ and can be up to many for the case that issued raw material is used to defected finished goods or that issued raw material is not enough to produce demanded finished goods.

Record time worked Produce Finished Goods There is also one across cycle-related event, ‘produce finished goods’ in production cycle and ‘record time worked’ in payroll cycle. F&B has a policy that production people has to record their worked time by scanning their finger print everyday.As the ‘record time worked’ is a sequential event of ‘produce finished goods’, minimum cardinality between them has to be one and zero respectively. For maximum cardinality,note that there is always only one occurrence of ‘produce finished goods’ per day because it is a production of bakeries. All bakeries have to be done daily. Therefore, each ‘produce finished goods’ relates to not more than one ‘record time worked’. The fact that employee of F&B has to record their time worked daily makes each ‘record time worked’ be a result from at least one occurrence of ‘produce finished goods’ and not more than one.

The cardinality between event and resource Inventory (Raw material) Issue Raw material The relationship between ‘Inventory(raw material)’ and ‘issue raw material’ is M:N. Some raw material is never used in production especially for new ingredient, but most raw material is issued for multiple times. On the other side, each time production people issue raw material, they have to issue at least one raw material and can be maximum to several raw material. Produce Finished Goods Inventory (Finished Goods) The relationship between ‘Inventory(finished goods)’ and ‘produce finished goods’ is M:N.For F&B, the case that finished goods are increased by returned inventories from customers cannot happen because bakery product cannot be kept to resale nor remake. Whenever customers reject delivered goods for any reason, F&B has to dispose those rejected bakeries immediately. Therefore, each type of finished goods has to increased from at least one occurrence of ‘produce finished goods, and can be maximum of many occurrences for those best selling bakeries.

On the other side, each ‘produce finished goods’ may create zero finished goods since unsatisfied bakeries have been made especially for new first-try menu.However, each ‘Produce finished goods’ can create up to load of finished goods at the same time. Produce Finished Goods Machine & Equipment Some machine and equipment of F&B are not used to produce finished goods, but some of them are used in production cycle everyday. On the other side, every occurrence of ‘produce finished goods’ required at least one baking machine and can be up to a lot. The cardinality between event and agent Employee (Production mng. ) Issue Raw material Employee (Warehouse) Produce Finished GoodsEmployee (Production people) Typically after production manager has noticed the demanded quantity of raw material to be issued which is indicated in ‘production order’ , production manager is going to approve the withdrawal and gets production people to issue demanded raw material from warehouse ,where warehouse people take responsibility. Consequently, as shown in the picture above, ‘issue raw material’ is linked to two agents, warehouse people and production manager.

Both of them has minimum of one agent and maximum of one agent for accountability.On the other side, the ‘warehouse people’ and ‘production manager’ entity may relate to at least zero ‘issue raw material’ and can be maximum of many ‘issue raw material’. Zero cardinality is allowed for new warehouse people and production manager or those who do not directly account for this event while maximum cardinality is allowed for those employees who involve in this event consistently. The same situation occurs when ‘production manager’ and ‘production people’ are linked to ‘produce finished goods’. Every morning production manager approves day-to-day finished goods production and let production people bake ordered bakeries.Therefore each ‘produce finished goods’ relates to one and only one ‘production manager’ for accountability reason, but relates to at least one production people and can be up to many ‘production people’ who work together for large order. Payroll cycle The cardinality between two events Disburse cash Record time worked For payroll cycle, employees especially for production people have to record their time worked everyday before they start working in the kitchen.

However F&B usually records their time worked and pays them monthly.Therefore, each time ‘record time worked’ may not lead to any ‘disburse cash’ and can result in maximum of one ‘disburse cash. Note that ‘disburse cash’ is an integrated event which is also linked to ‘receive raw material’ and ‘acquire machine&equipment’ in expenditure cycle. Consequently, each occurrence of ‘disburse cash’ may not relate to any ‘record time worked’ and can relate up to multiple of ‘record time worked’ when the company disburse monthly salary, zero minimum and many maximum cardinality shown respectively. The cardinality between event and agent Employee (Production people) Record time workedEmployee (Production mng. ) At F&B, each occurrence of ‘record time worked’ has to get approval from production manager, so it is linked to production manager and production people with minimum and maximum of one agent involved for accountability reason. On the contrary, both ‘employee (production people) and ‘employee (production manager)’ are linked to ‘record time worked’ with zero minimum and many maximum cardinality.

Two of zero minimum cardinalities are allowed for those employees who do not need to record their time worked such as accounting and sale people and those who do not involve in any approval of

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Rea Diagram for Food and Beverage Company. (2019, Feb 15). Retrieved August 21, 2019, from https://phdessay.com/rea-diagram-for-food-and-beverage-company/.