The sales department is in a unique position: customers seek out Thermo-Chem because it has cornered the market with virtually no competition except in the chemicals market. Therefore, only limited sales effort is expended to promote its products. The sales department employs one sales representative, who is compensated on a commission basis. When a customer wishes to place an order, the sales representative arranges for a meeting to discuss the customer’s needs and requirements. After determining the customer’s needs, the sales representative meets with the product design engineering staff to brief them on the customer’s specific design requirements. Product design then proceeds to create a bill of materials and a cost estimate for the entire project. Two copies of the bill of materials are created: the first is filed in the product design department and the other is sent with the cost estimate to the sales representative. The sales representative then applies a profit mark-up to the cost estimate as he sees fit, and then provides a written quote to the client. When the client accepts the quote, a signed copy of the quote is remitted back to the sales representative, who uses it to approve the customer’s credit and to create a multicopy sales order. The sales order is distributed as follows:

Sales Order Copies:

File copy: filed in sales office in open sales order file

Customer: sent to customer

Invoice: sent to billing department

Shipping notice: sent to shipping department

Packing slip: sent to production with bill of materials

Ledger copy: sent to billing department

 

Production

In order to facilitate efficient materials management and purchasing, the raw materials records are placed under the direct control of the production manager. In addition, the production manager is also responsible for the storeroom function.

The production manager relies on the bill of materials to check for the availability of raw materials in the inventory database. The computer confirms if the needed items are on hand, and the production manager completes a work order form, signs it, and gives it to the storeroom clerk. The work order is the document that authorizes the storeroom clerk to release the required raw materials to the production employees. The production manager then posts the transaction to the raw materials records. If materials are not available, the production manager selects a supplier, completes a purchase order (four copies), signs it, and distributes it as follows:

1. First copy is sent to the supplier

2. Second copy is sent to accounts payable

3. Third copy is filed in the production department

4. Fourth copy is sent to the receiving department

A production clerk is responsible for keeping track of direct labor, raw materials, and overhead costs for each batch of vessels produced. When the product is completed, the cost data is sent to the accounting department, where it is posted to the general ledger accounts by an accounting clerk.

Once the project is completed, the employees who worked on the job inspect their work, test and approve it, and enclose the packing slip with the finished product. The finished vessel is then transferred to the shipping department.

Shipping

When the finished vessels arrive at the shipping department, the shipping notice is used to fill out a bill of lading (one copy) for the goods. After the vessels are shipped to the customer, the clerk stamps the shipping notice “shipped” and sends it to the billing department as proof of shipment. He also gives the bill of lading to the shipper. Finally, the clerk records the shipment in the shipping log.

Billing

Upon receipt of the invoice from the sales department, the billing clerk sends the invoice to the customer. The ledger copy is also sent at that time to the accounts receivable clerk. After the job is completed, the billing clerk receives the shipping notice from the shipping department. Billing then sends the shipping notice to the sales department, which uses it to close the open sales order. Finally, the billing clerk records the transaction in the sales journal.

Upon receipt of the ledger copy (sales order) from the billing department, the accounts receivable clerk inputs the sales data into the customer’s account in the accounts receivable module of the accounting package. The ledger copy is then filed.

On receipt of the cash prelist and the remittance advice from the mail room, the clerk reconciles the remittance advices to the prelist to ensure completeness of the list and then uses the prelist to post the transaction to the customer’s account.

Periodically, the clerk posts journal vouchers to the general ledger accounts to reflect changes in receivables.

This question is about accounting information system,

Please using information supplied in the Thermo-Chem Case Study:

1. Prepare system flowcharts for Thermo-Chem’s:

  • Sales process

  • Production process

  • Shipping process  

  • Billing process