Accounting Information Systems (9th Edition)
Chapter 4, Problem 7IC | 6 Bookmarks
Problem
CUSTOM FABRICATIONS (STAND ALONE PC BASED ACCOUNTING SYSTEM) (Prepared by Will Richens an
Catchpole, Lehigh University)
...
Accounting Information Systems (9th Edition)
Chapter 4, Problem 7IC | 6 Bookmarks
Problem
CUSTOM FABRICATIONS (STAND ALONE PC BASED ACCOUNTING SYSTEM) (Prepared by Will Richens an
Catchpole, Lehigh University)
USTOM FABRICATIONS (STAND ALONE PC BASED ACCOUNTING SYSTEM) (Prepared by Will Richens an
Catchpole, Lehigh University)
CUSTOM FABRICATIONS Inc., is a bicycle manufacturing firm founded in 2000 that currently employs 126 peop
company produces custom bicycles in its factory located near Los Angeles, CA. Each bicycle is tailored to a ride
a number of different measurements, including height, weight, inseam, and arm length. These measurements ar
30 professional bicycle shops around Southern California, which are certified to size CUSTOM FABRICATIONS
accepting orders only through licensed dealers, CUSTOM FABRICATIONS ensures that each bike matches its r
precisely. CUSTOM FABRICATIONS custom bikes are considered extremely high quality, and the company take
using only the best components sourced from around the world. Accordingly, CUSTOM FABRICATIONS purchas
cast of hundreds of suppliers, chosen for their commitment to quality and reliability.
Demand for CUSTOM FABRICATIONS’ cycles has grown exponentially in recent years. The surge in demand w
somewhat unexpected and the company’s factory has been operating at capacity for over a year. As a result, cu
orders face a production backlog of approximately 5–6 weeks. The company’s operations have been further ham
severe inefficiencies and control weaknesses attributed to its legacy accounting system. Your firm has been hire
outside consultant to suggest improvements in the company’s accounting procedures. The following paragraphs
the company’s revenue cycle.
Revenue Cycle
SALES ORDER SYSTEM. The sales order process begins when a licensed CUSTOM FABRICATIONS dealer fa
completed customer order and measurement form to the sales department. When the fax is received, a sales
representative calls the dealer to confirm the order details and generates a quote based on the complexity of the
sales clerk then enters the measurements and quoted price into his PC terminal, which automatically generates
order form. The clerk prints three hard copies of the sales order form. The first copy is sent to the billing departm
the second is sent to the factory. The clerk files the third copy, along with the customer order in the sales departm
open customer order file.
The billing department clerk uses the first copy of the sales order to compute the final sales price and manually p
two copies of the customer invoice. One copy of this invoice is sent to the customer, while the second is used by
clerk to update the sales order journal and accounts receivable subsidiary from his terminal. At the end of each d
clerk prints out a hard-copy summary of the AR ledger and the sales journal and forward them to the general led
department.
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