Danielle Wongus processes hundreds of sales orders monthly forcontractor tools for Cambridge Wholesale Industries. The companysells the tools to retail stores in the Mountain stores. Some areshipped from inventory, but others are shipped directly to theretail stores form vendors. Direct shipment results in significantfreight savings. In most cases, Danielle receives the sales orderrequest from the salespeople, but in other cases the orders comedirectly to Danielle by phone from customers who want directshipments or who are used to buying directly from the company.Danielle processes the order through the Sales Orders task icon andsends the sales order to shipping, which results in the shipmentsbeing sent. When sales orders are initiated by the shippingdepartment after the goods are shipped, they are sent back toDanielle for billing. She processes them using the Sales Invoicestask icon and sends the sales invoice tot eh customers.
Several years ago, Danielleâs brother-in-law formed a smallbusiness, Idaho Valley Hardware that sells certain contractortools. Idaho Valley Hardware orders some of their tools fromCambridge Wholesale Industries. When the order comes in, Danielleprocesses the order like any other sales order to initiate theshipment. The shipping department ships the goods and initials thesales order, indicating shipment has occurred. If the amountshipped differs from the amount on the sales order, shippingchanges the shipping order. When the initialed sales order isreturned to Danielle, she sometimes destroys the sales order anddoes not prepare a sales invoice. Other times she records a lowerprice for the sales than the normal amount or bills for less goodsthan were shipped.
Later, Danielle does one of three things. In some cases sheprepares a credit memo for an allowance for defective merchandiseor a pricing error. Other times, she deletes the transactionentirely to eliminate the account receivable from the records.Another method that Danielle uses to conceal the fraud is to give alarger early payment discount than the normal 2% allowed by companypolicy when processing cash receipts.
Required:
Suggest improvements in the system including both Sage 50Accounting control and other system improvements to minimize thelikelihood of this fraud. Danielle must process sales invoices. Itis impractical, given the size of the business, to restrictDanielle to only one of the Sales Orders, Sales invoices, Creditsand Returns, and Receive Money task icons
Danielle Wongus processes hundreds of sales orders monthly forcontractor tools for Cambridge Wholesale Industries. The companysells the tools to retail stores in the Mountain stores. Some areshipped from inventory, but others are shipped directly to theretail stores form vendors. Direct shipment results in significantfreight savings. In most cases, Danielle receives the sales orderrequest from the salespeople, but in other cases the orders comedirectly to Danielle by phone from customers who want directshipments or who are used to buying directly from the company.Danielle processes the order through the Sales Orders task icon andsends the sales order to shipping, which results in the shipmentsbeing sent. When sales orders are initiated by the shippingdepartment after the goods are shipped, they are sent back toDanielle for billing. She processes them using the Sales Invoicestask icon and sends the sales invoice tot eh customers.
Several years ago, Danielleâs brother-in-law formed a smallbusiness, Idaho Valley Hardware that sells certain contractortools. Idaho Valley Hardware orders some of their tools fromCambridge Wholesale Industries. When the order comes in, Danielleprocesses the order like any other sales order to initiate theshipment. The shipping department ships the goods and initials thesales order, indicating shipment has occurred. If the amountshipped differs from the amount on the sales order, shippingchanges the shipping order. When the initialed sales order isreturned to Danielle, she sometimes destroys the sales order anddoes not prepare a sales invoice. Other times she records a lowerprice for the sales than the normal amount or bills for less goodsthan were shipped.
Later, Danielle does one of three things. In some cases sheprepares a credit memo for an allowance for defective merchandiseor a pricing error. Other times, she deletes the transactionentirely to eliminate the account receivable from the records.Another method that Danielle uses to conceal the fraud is to give alarger early payment discount than the normal 2% allowed by companypolicy when processing cash receipts.
Required:
Suggest improvements in the system including both Sage 50Accounting control and other system improvements to minimize thelikelihood of this fraud. Danielle must process sales invoices. Itis impractical, given the size of the business, to restrictDanielle to only one of the Sales Orders, Sales invoices, Creditsand Returns, and Receive Money task icons
Related questions
Soccer Ball Inc.,
Soccer Ball Inc., a manufacturer of youth soccer balls, prepared the income statement for the year ended December 31, 2016 (see Exhibit 1):
1
| Exhibit 1 | Income Statement | |
| Sales (1888,000 units) | $9,440,000 | |
| Cost of sales | 5,664,000 | |
| Gross margin | $3,776,000 | |
| Delivery costs | ||
| Containers | $182,000 | |
| Packing and Shipping Labor | $438,000 | |
| Freight | $800,000 | $1,420,000 |
| Selling Costs | ||
| Sales Manager | $60,000 | |
| Sales Salaries | $90,000 | |
| Commissions | $80,000 | |
| Sports Consortium Commissions | $70,000 | |
| Bad Debts | $30,000 | $330,000 |
| Advertising | ||
| Educational Media | $120,000 | |
| Sport Industry Media | $90,000 | |
| $210,000 | ||
| General Business Support | $150,000 | |
| Operating Profit | $1,666,000 |
The company sells soccer balls to schools, childrenâs sports teams, and sporting goods stores which represents 4 segments. The selling price per unit is $5. The cost of sales is all variable.
Large public and private schools receive advertising through educational media, and place orders directly to the manufacturing plant. No sales Staff calls are made. Orders are received through the mail, fax, telephone or by computer. School districts arrange for their own delivery and send a truck to the plant to pick up orders when they are ready.
Smaller private schools located with 100 mile radius of then plant are visited by salesmen. These salesmen are paid commissions, and are not company employees.
Sporting goods stores within a 400 miles radius of the plant are visited by 4 salesmen who are company employees and are paid a salary.
Childrenâs sports teams within 600 miles radius of the plant are contacted through a sports consortium which sells to leagues. Advertising is done through sports industry media. The cost of that advertising is shared 50/50 with the sports consortium. The sports consortium receives a commission on their sales.
The Sales manager oversees the sales to all segments and his work benefits all segments based on their volume of activity. General business support
Soccer balls are sold in containers of three (3) different sizes: namely, 16âs (small), 32âs (medium), and 48âs (large). Each order is comprised of a cases lot of o appropriate containers. The units associated with the packaging each case are depicted in Exhibit 2.
In addition, delivery freight is charged to Soccer Inc., based on the number of containers shipped and delivery miles.
During 2016, an analysis of the marketing operations was made. Exhibit 3 shows the results of that analysis.
2
| Exhibit 2 | |||
| Small | Medium | Large | |
| Container | $2 | $3 | $4 |
| Packing & shipping labor | $6 | $7 | $8 |
| Exhibit 3 | |||||
| Total | Large schools | Small Private Schools | Sporting Goods Stores | Sports Team Sales | |
| Number of orders | |||||
| Small Cases | 22000 | 4000 | 18000 | ||
| Medium Cases | 30000 | 8000 | 5000 | 15000 | 2000 |
| Large Cases | 12000 | 7000 | 5000 | ||
| Provision for uncollectible accounts as % of sales | 0.30% | 0.15% | 0.40% | 0.268% |
Required
Prepare a statement showing the profitability of each type of sales, i.e., large schools, small private schools, sporting goods stores, and sports team sales. Prepare supporting schedules to show the allocation of cost items. Describe the basis on which costs were assigned or allocated to each. (hint: freight costs are charged based on the number of containers shipped and miles driven. To allocate freight costs to customers the number of containers times the number of miles radius of the plant is appropriate) 80 points
Prepare a partial statement showing the gross profit (sales less cost of goods sold) of each container size of balls sold. 20 points
