Question: The Moran Company is a discount tire dealer that operates

The Moran Company is a discount tire dealer that operates 25 retail stores in a metropolitan area. Both private- brand and name- brand tires are sold. The company operates a centralized purchasing and warehousing facility and employs a perpetual inventory system. All purchases of tires and related supplies are placed through the company’s central purchasing department to take advantage of quantity discounts. The tires and supplies are received at the central warehouse and distributed to the retail stores as needed. The perpetual inventory system at the central facility maintains current inventory records, designated reorder points, optimal order quantities, and continuous stock-takings for each type of tire and size and other related supplies. The documents employed in the inventory control system and their uses are presented below.
Retail stores requisition This document is submitted by the retail stores to the central warehouse whenever tires or supplies are needed at the stores. The shipping clerks in the warehouse department fill the orders from inventory and have them delivered to the stores.
Purchase requisition The inventory control clerk in the inventory control department prepares this document when the quantity on hand for an item falls below the designated reorder point. The document is forwarded to the Purchasing Department.
Purchase order The purchasing department prepares this document when items need to be ordered. The document is submitted to an authorized vendor.
Receiving report The warehouse department prepares this document when ordered items are received from vendors. The receiving clerk completes the document by indicating the vendor’s name, the date the shipment is received, and the quantity of each item received.
Invoice An invoice is received from vendors specifying the amounts owed by Moran. The departments involved in Moran’s inventory control system are described below.
Inventory control department This department is responsible for maintaining all perpetual inventory records for all items carried in inventory. This includes current quantity on hand, reorder point, optimal order quantity, and quantity on order for each item carried.
Warehouse department This department maintains the physical inventory of all items carried in inventory. All orders from vendors are received (receiving clerk) and all distributions to retail stores are filled (shipping clerks) in this department.
Purchasing department The purchasing department places all orders for items needed by the company.
Accounts payable department Accounts payable main-tains all open accounts with vendors and other creditors. All payments are processed in this department.

Prepare a flow diagram to show how these documents should be coordinated and used among the departments at the central facility of Moran Company to provide adequate internal control over the receipt, issuance, and replenishment of and payment for tires and supplies. Assume that the documents have a sufficient number of copies to ensure that the perpetual inventory system has the necessary basic internal controls.

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  • CreatedFebruary 26, 2015
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