Test Bank for Accounting Information Systems, 7th Edition: Cynthia D.

Heagy

Test Bank for Accounting Information Systems, 7th

Edition: Cynthia D. Heagy

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Chapter 5

Reporting Process, Coding Methods, and Audit Trails

INTRODUCTORY SCENARIO: SUGGESTED SOLUTIONS TO QUESTIONS

1. Weekly purchase order report, weekly purchase request report, monthly video sales reports, daily sales
reports by store, weekly inventory turnover report by store, monthly payroll reports, quarterly financial
statements, daily video rental report by store. It would be helpful for individual store managers to receive
reports related to activity in their stores, such as video sales and rentals (daily) or delinquent accounts
(daily), as well as inventory reports (weekly). They might not need to receive reports about other stores,
only reports of those items over which they have control.

2. Most reports would be by store.

3. Reports to indicate problems; e.g., videos not being rented often (might need to be transferred to another
location where the video is more popular or might need to be sold), delinquent accounts, excessive
overtime reports. The purpose of these reports is to provide Andrea or the managers with succinct reports
of variances from an expected norm so they can make timely decisions.

4. Reports might be prepared on a daily or weekly basis showing the number of film rentals for each store
compared with prior data or budget amounts. These will permit some judgment of operations between
monthly reporting periods. Staffing levels (number of workers in attendance) or hours worked by day or
week might also be valuable. Each store manager should be provided with copies of the reports that relate
only to their operation.

A report showing (1) the number of rentals per film title, (2) the number of copies of each film, and (3) the
rentals per copy [(1) divided by (2)] will suggest which films are understocked and which are overstocked.
Because there will be a large number of titles, only the titles having extremely high or low rental per copy
should be included in the report. And since store managers initiate the purchase of films, these reports
should be prepared for each store.

5. The reports illustrate the concepts of:

Concise reports (daily and weekly rental and staffing data)
Reporting both physical and monetary data (rent is a physical measure)
Frequency of reporting (some reports are daily or weekly and others are monthly)
Responsibility reporting (store mangers are held responsible for their store)
Comparative reporting (data is compared with prior data and/or budgets)
Exception reporting (only some film titles are reported)

SOLUTIONS TO DISCUSSION QUESTIONS AND PROBLEMS

1. Ray can exercise influence over the quantity of direct labor used and the yield rate (amount of spoilage).
Therefore, he should receive each morning a report of activities for the previous day. The report on the
 next page is a suitable report; however, the students’ solutions will vary. Their solutions should emphasize
physical reporting on a daily basis for Ray.

DAILY PRODUCTION REPORT

Date: March 5

Yield
Machine Production Yield Rate
1 514 493 95.9
2 623 581 93.3
3 580 549 94.7
4 531 506 95.3
5 255 243 95.3
2,403

Direct Labor Hours 263

Output per Hour 9.14

This report will enable Ray to monitor yield by machine daily and to determine how effectively direct labor
is used. If (1) work is organized so that direct labor hours can be captured for each machine and (2) the
benefits justified the additional record-keeping, then direct labor hours might be accumulated by machine.
If this report had been in use, it is likely that excess spoilage would have been avoided for almost an entire
week.

The report now in use should continue to be furnished to Joe on a weekly basis. If problems arise, he can
refer to the reports received by Ray.

2. a.
COLUMBUS CABLE TV, INC.
For October 2013 and 2012

Service Level 2013 2012 Incr. (Decr.) Percent

New Subscribers
Basic 839 1,234 (395) (32.0)
Super 110 296 (186) (62.8)
Premium 605 599 6 1.0

Subscribers Lost
Basic 441 450 (9) (2.0)
Super 579 563 16 2.8
Premium 285 257 28 10.9

Changes in Level of Service

Basic (147) (120) (27) (22.5)
Super ( 26) ( 15) ( 11) (73.3)
Premium 173 135 38 28.1
2. b. The comparative report above gives an entirely different impression of the fall 2013 campaign’s
effectiveness as compared with Exhibit 5.2. The drop in new subscribers is dramatic. There seems to have
been no effect on lost subscribers. An improved mix of service levels is revealed, but this is of little
comfort given the decline in market penetration. Extraneous factors must also be considered, such as the
existing market share of the company and changes in competition as well as demographic changes in the
Columbus market. Unless extraneous factors are felt to have significantly affected October results, the
consultant should probably not be retained.

2. c. The report illustrates the principle of conciseness by its brevity. Use of subscribers illustrates the use of
physical measures. Comparative reporting is illustrated by comparing the current month with the same
month last year. Finally, it illustrates functional reporting since is designed for the marketing and sales
manager for the company.

3. a. A general relationship exists between the length of the reporting period and the likelihood a given type of
data (physical or monetary) will be the most useful to report. The shorter the reporting period, the more
likely that physical data will be most useful, and the longer the reporting period the more likely that
monetary data will be most useful.

3. b. Production personnel seem to have a greater affinity for and find physical data to be most useful, sales
personnel find both physical and monetary data useful, while financial personnel find that financial data is
most useful.

4. The four basic steps that go into the creation of an instance document are as follows:

A. Select a standard taxonomy and download this taxonomy into the XBRL software roduct. Taxonomies
are available at no cost at www.xbrl.org and www.xbrl.us.
B. Mark up the data. Assign a specific XBRL tag from the standard taxonomy to each data item in the
inancial report. If an appropriate tag is not available from the standard taxonomy, the preparer can create a
new customized XBRL tag.
C. Edit the tagging to detect any errors. The XBRL software does this.
D. Generate the instance document. The XBRL software does this.

5. An XBRL instance document is a document that has been tagged according to the rules of XBRL thus
making it available for analysis and processing. In other words, the document is an instance of one that
follows the rules of XBRL. An instance document includes coding that comes from an appropriate
taxonomy.

6. Some XBRL taxonomies are: IFRS-GP (International Financial Reporting Standards, General Purpose)
and US-GAAP. Some United States taxonomies for specific industries are US GAAP Commercial and
Industrial, US GAAP Banking and Savings, US GAAP Insurance, US GAAP Investment Banking. There
is also the XBRL GL( global ledger) taxonomy for internal reporting and consolidations within
organizations only.

7. The difference in extensible markup language (XML) and hypertext markup language (HTML) is that
HTML tags identify the elements of a page so a browser such as Internet Explorer can display that page on
your computer screen. The tags in HTML don’t say anything about the content of the data. XML tags, on
the other hand, describe the content, for example <course_name>AIS</course_name> and are used for data
exchange over the Web. Content is separated from presentation. An XML document contains only data
(no formatting).
8. The number 640 would be assigned to the advertising expense general ledger account so the number would
occupy the first three digit fields for entries for all types of advertising.

The coding for the second field, which contains four digits, would be as follows:
 The first digit would denote either the department (shoes, clothing, cosmetics, etc.) Or that the
advertisement was institutionally-related. Each department would be assigned a number from one
through eight, with nine being reserved for institutional advertising.
 If the first digit referenced either the shoe or clothing department, the second digit would denote whether
the department was in the ladies’, mens’, or children’s section. Each classification would be
assigned a number from one through three. If this reference is not applicable, i.e., the advertising
if for one of the other departments or is institutional, a digit of zero would be used.
 The third digit would signify where the advertisement was being run. Each of the different media would be
assigned a number from one through four.
 The fourth digit would denote the activity involved. The different activities for newspaper and television
advertisements would be assigned a number from one through four. A digit of zero would indicate
that this field was not applicable for billboard and yellow pages advertisements.

This coding system is depicted below:

640. X X X X
1 - Shoes 0 - N/A 1 - Newspaper 0 - NA
2 - Clothing 1 - Ladies’ 2 - Television 1 - Advertisement Space
3 - Cosmetics 2 - Mens’ 3 - Billboard 2 - Advertisement Layout
4 - Linens 3 - Children’s 4 - Yellow Pages 3 - Broadcast Time
5 - Housewares 4 - Film Production
6 - Furniture
7 - Appliances
8 - Electronics
9 - Institutional

The account number to use for an expenditure for layout on a Ladies’ shoes ad would be 640.1112.

9. The 06/03/12 and 06/25/12 debits allow an auditor to find the proper entry in the cash disbursements
transaction file since the check number, which is internally generated and pre-numbered, is referenced and
the cash disbursements journal is in check number order. However, the 06/19/12 debit references only the
vendor’s credit memo number, which is not internally generated and, therefore, is not suitable for use as a
reference identifier.

All of the credit entries are lacking a suitable reference identifier. Four of these entries use a Pannell
Partnerships purchase order number, which is inappropriate because a purchase order does not evidence a
completed transaction. Although the purchase order number may allow the auditor to find the relevant
purchase transaction file entry in many, or even most, situations, this reference would prove insufficient if
there were multiple shipments and invoices on a single purchase order. Also, purchase transactions will not
be in the same order as the purchase orders. The other entry references the vendor’s invoice number, which
is inappropriate, because entries in the purchases journal (the source for this entry) will not be in an order
that will permit a lookup of the source entry except perhaps by random scanning for the invoice number.

Each entry in the purchases journal should be numbered, and these numbers should be used as references in
the vendor accounts. The same should be done for credit memoranda.
10. a. Our sales invoices, credit memos and checks are good identifiers for an audit trail.

10. b. Our purchase orders and any document originating outside our organization are poor identifiers for an audit
trail.

10. c. The documents representing the transaction must be sequentially numbered, be of uniform size, and be
created at the same time as the transaction occurs. Only some internal documents will meet this
requirement.

11. The sales transaction file in Exhibit 4.4 shows a credit sale, invoice #1006, to customer code #203, 60
hours at $100 per hour.

Exhibit 4.4
Writing Sale Transactions to the Sales Transaction File
(A 0 denotes a cash sale, and a 1 denotes a credit sale.)

File 1:
Invoice Invoice Customer Cash/Credit
No. Date Code Sale
1001 01/02/12 202 0
1002 01/04/12 201 1
1003 01/08/12 204 1
1004 01/10/12 202 1
1005 01/21/12 206 0
1006 01/28/12 203 1

File 2:
Invoice Billable Billable
No. Hours Rate
1001 6 100
1002 42 100
1003 27 100
1004 30 100
1005 15 100
1006 60 100

The sales journal in Exhibit 4.6, which is a printout of the sales transaction file in Exhibit 4.4, shows
invoice #1006, to customer code 203-Cherry Gardens for $6,000. Furthermore, the total for customer 203
is $6,000. Total credit sales are $15,900.
Exhibit 4.6
Printing the Sales Journal

SALES JOURNAL
Month Ending 1/31/12

Customer Cash Credit Invoice

Date Code Name Sales Sales No.
01/02/12 202 Green Brothers $600 1001
01/04/12 201 Black Corp. $4,200 1002
01/08/12 204 Brown Company 2,700 1003
01/10/12 202 Green Brothers 3,000 1004
01/21/12 206 Red Flag Sales 1,500 1005
01/28/12 203 Cherry Gardens 6,000 1006
Totals $2,100 $15,900

Totals for Customer Codes:

201 $4,200
202 $600 3,000
203 6,000
204 2,700
206 1,500

The customer master file in Exhibit 4.7 shows customer code 203-Cherry Gardens with year-to-date
balance of $0 and a current balance of $2,400 before updating (posting). After updating, the year-to-date
and current balances have been increased by the $6,000 sale.

Exhibit 4.7
Updating the Customer Master File with the Sales Transaction File

(a) File Before Posting (as it was in Exhibit 4.3)

Customer Year-To- Current

Code Customer Name Date Sales Balance
201 Black Corp. 0 0
202 Green Brothers 0 0
203 Cherry Gardens 0 2,400
204 Brown Company 0 4,300
206 Red Flag Sales 0 3,600
(b) File After Posting

Customer Year-To- Current

Code Customer Name Date Sales Balance
201 Black Corp. 4,200 4,200
202 Green Brothers 3,600 3,000
203 Cherry Gardens 6,000 8,400
204 Brown Company 2,700 7,000
206 Red Flag Sales 1,500 3,600

A customer invoice in Exhibit 4.8 is for invoice #1006 to Cherry Gardens with an amount due of $6,000.
See Exhibit 4.8 on the next page.
Exhibit 4.8
Printing Customer Invoices

CUSTOMER INVOICE CUSTOMER INVOICE

Green Brothers Invoice No. 1001 Black Corp. Invoice No. 1002
Invoice Date Invoice Date
01/02/12 01/04/12
Cash X Credit Cash Credit X

Billable Billable Total Billable Billable Total

Hours Rate Amount Due Hours Rate Amount Due
6 $100 $600 42 $100 $4,200

CUSTOMER INVOICE CUSTOMER INVOICE

Brown Company Invoice No. 1003 Green Brothers Invoice No. 1004
Invoice Date Invoice Date
01/08/12 01/10/12
Cash Credit X Cash Credit X

Billable Billable Total Billable Billable Total

Hours Rate Amount Due Hours Rate Amount Due
27 $100 $2,700 30 $100 $3,000

CUSTOMER INVOICE CUSTOMER INVOICE

Red Flag Sales Invoice No. 1005 Cherry Gardens Invoice No. 1006
Invoice Invoice Date
Date 01/21/12 01/28/12
Cash X Credit Cash Credit X

Billable Billable Total Billable Billable Total

Hours Rate Amount Due Hours Rate Amount Due
15 $100 $1,500 60 $100 $6,000

The open customer invoice file in Exhibit 4.9 that has been updated by the sales transaction file shows a
new record for invoice #1006, in the amount of $6,000.
Exhibit 4.9
Updating the Open Customer Invoice File with the Sales Transaction File

(a) File Before Posting

Invoice Invoice Customer Invoice Date Invoice Amount

No. Date Code Amount Paid Paid
0998 12/06/11 206 3,600
0999 12/16/11 203 2,400
1000 12/17/11 204 4,300

(b) File After Posting

Invoice Invoice Customer Invoice Date Invoice Amount

No. Date Code Amount Paid Paid
0998 12/06/11 206 3,600
0999 12/16/11 203 2,400
1000 12/17/11 204 4,300
1001 01/02/12 202 600 01/02/12 600
1002 01/04/12 201 4,200
1003 01/08/12 204 2,700
1004 01/10/12 202 3,000
1005 01/21/12 206 1,500 01/21/12 1,500
1006 01/28/12 203 6,000

The general journal transaction file in Exhibit 4.18 shows summarized credit sales transferred from the
sales transaction file according to transaction number SA855. Two general ledger accounts are affected by
this transaction–account #1230 is debited for $15,900, and account #4200 is credited for $15,900. The
$6,000 credit sale to Cherry Gardens is included in both $15,900 amounts. As previously mentioned,
$15,900 is the amount of total credit sales shown in Exhibit 4.6.
Exhibit 4.18
Writing Other Transaction Data to the General Journal Transaction File

Trans- Trans-
action action Account
No. Date No. Amount* Explanation
GJ850 01/10/12 5700 3,300 Office rent
GJ850 01/10/12 1120 (3,300) Office rent
GJ851 01/15/12 5690 1,800 Repairs to vehicles
GJ851 01/15/12 2110 (1,800) Repairs to vehicles
GJ852 01/31/12 5130 6,300 Monthly payroll
GJ852 01/31/12 1120 (6,300) Monthly payroll
GJ853 01/31/12 5340 300 Depreciation on equipment
GJ853 01/31/12 1650 (300) Depreciation on equipment
SA854 01/31/12 1120 2,100 Cash sales
SA854 01/31/12 4200 (2,100) Cash sales
SA855 01/31/12 1230 15,900 Credit sales
SA855 01/31/12 4200 (15,900) Credit sales
CA856 01/31/12 1120 12,900 Collections on account
CA856 01/31/12 1230 (12,900) Collections on account
*Positive numbers are debits; negative numbers are credits.

The general journal in Exhibit 4.19 is a printout of the general journal transaction file. Therefore, the
journal includes the same information just described in the general journal transaction file except that we
can see from the journal that account number 1230 is accounts receivable, and account number 4200 is
sales of services.

Exhibit 4.19
Printing the General Journal

GENERAL JOURNAL
Month Ending 1/31/12
Trans- Trans-
action action Account
No. Date No. Name Debit Credit Explanation
GJ850 01/10/12 5700 Rent expense 3,300 Office rent
GJ850 01/10/12 1120 Cash in bank 3,300 Office rent
GJ851 01/15/12 5690 Repair expense 1,800 Repairs to vehicles
GJ851 01/15/12 2110 Accts. payable 1,800 Repairs to vehicles
GJ852 01/31/12 5130 Salary expense 6,300 Monthly payroll
GJ852 01/31/12 1120 Cash in bank 6,300 Monthly payroll
GJ853 01/31/12 5340 Depre. expense 300 Depre. on equipment
GJ853 01/31/12 1650 Accumulated depre. 300 Depre. on equipment
SA854 01/31/12 1120 Cash in bank 2,100 Cash sales
SA854 01/31/12 4200 Sales of services 2,100 Cash sales
SA855 01/31/12 1230 Accounts receivable 15,900 Credit sales
SA855 01/31/12 4200 Sales of services 15,900 Credit sales
CA856 01/31/12 1120 Cash in bank 12,900 Collections on account
CA856 01/31/12 1230 Accounts receivable 12,900 Collections on account
$42,600 $42,600
 The general ledger master file in Exhibit 4.21(a) before posting and 4.21(b) after posting shows the details
of the activity in the following two accounts affected by the sale to Cherry Gardens:

#1230-Accounts Receivable #4200-Sales of Services

Beginning balance (before posting) $10,300 dr Beginning balance (before posting) 0
Debited per transaction SA855 15,900 dr Credited per transaction SA854 $ 2,100 cr
Credited per transaction CR856 12,900 cr Credited per transaction SA855 15,900 cr
Current balance $13,300 dr Current balance $18,000 cr

Exhibit 4.21
Updating the General Ledger Master File with the
General Journal Transaction File

(a) File Before Posting [as it was in Exhibit 4.16(b)

Account Beginning Current
Number Account Name Balance Balance
1120 Cash in bank 4,100 4,100
1230 Accounts receivable 10,300 10,300
1600 Equipment 15,000 15,000
1650 Accumulated depreciation (1,800) (1,800)
2110 Accounts payable (2,800) (2,800)
3100 Owner's equity (24,800) (24,800)
4200 Sales of services 0 0
5130 Salary expense 0 0
5340 Depreciation expense 0 0
5690 Repair expense 0 0
5700 Rent expense 0 0

(b) Files After Posting

File 1:
Account Beginning Current
Number Account Name Balance Balance
1120 Cash in bank 4,100 9,500
1230 Accounts receivable 10,300 13,300
1600 Equipment 15,000 15,000
1650 Accumulated depreciation (1,800) (2,100)
2110 Accounts payable (2,800) (4,600)
3100 Owner’s equity (24,800) (24,800)
4200 Sales of services 0 (18,000)
5130 Salary expense 0 6,300
5340 Depreciation expense 0 300
5690 Repair expense 0 1,800
5700 Rent expense 0 3,300

See File 2 on the next page.

 File 2:
Account Debit/Credit Transaction Transaction
No. Activity No. Date Explanation
1120 (3,300) GJ850 01/10/12 Office rent
1120 (6,300) GJ852 01/31/12 Monthly payroll
1120 2,100 SA854 01/31/12 Cash sales
1120 12,900 CA856 01/31/12 Collections on account
1230 15,900 SA855 01/31/12 Credit sales
1230 (12,900) CA856 01/31/12 Collections on account
1650 (300) GJ853 01/31/12 Depreciation on equipment
2110 (1,800) GJ851 01/15/12 Repairs to vehicles
4200 (2,100) SA854 01/31/12 Cash sales
4200 (15,900) SA855 01/31/12 Credit sales
5130 6,300 GJ852 01/31/12 Monthly payroll
5340 300 GJ853 01/31/12 Depreciation on equipment
5690 1,800 GJ851 01/15/12 Repairs to vehicles
5700 3,300 GJ850 01/10/12 Office rent

The general ledger account activity report in Exhibit 4.22 is a printout of the general ledger master file.
Therefore, the report includes the same information just described in the general ledger master file.

The income statement in Exhibit 4.23 shows sales of services of $18,000. The balance sheet shows accounts
receivable of $13,300.

Exhibit 4.23
Preparing the Financial Statements

Income Statement Balance Sheet

1/01/12 to 1/31/12 As of 1/31/12
REVENUE ASSETS
Sales of services $18,000 Cash $ 9,500
TOTAL REVENUE $18,000 Accounts receivable 13,300
Equipment $15,000
EXPENSES Accumulated depre. - 2,100 12,900
Salary expense 6,300 TOTAL ASSETS $35,700
Depreciation expense 300
Repair expense 1,800 LIABILITIES AND
Rent expense 3,300 OWNER’S EQUITY
TOTAL EXPENSES 11,700 Accounts payable $ 4,600
Owner’s equity 31,100
NET INCOME $ 6,300 TOTAL LIABILITIES
& OWNER’S EQUITY $35,700
12. a. The advantages of a computerized profit plan system for Kenbart Company include the following:

$ Complex financial relationships may be modeled and programmed, permitting management to obtain
rapidly the results of alternative decisions or assumptions. Therefore, a greater number of alternatives
may be examined within the planning cycle.
$ Continuous planning is made possible. Because the computer takes over burdensome computational
tasks, management may update plans or redo plans for changed conditions at any time of the year.
$ Flexibility in output options is possible. Various output formats and comparisons for actual results,
original plans, revised plans, and the current outlook may be programmed.

12. b. In the redesign of the format for the Profit Plan Report, the account titles and their order of presentation
would not change. Data would be presented for both the current month and year-to-date. Thus, the
columns under the Month and Year-to-Date headings would be the same. In order to assist management in
reviewing results and planning operations, three plan columns—original, revised, flexed revised—should
be included under both the Month and Year-to-Date headings. Furthermore, a current outlook column
should be included. An example of the column headings is shown below.

The Original Plan and Revised Plan columns are included in the report for reference purposes. Those two
plans were the predecessor of the flexed revised plan and may be useful in tracing changes. The Flexed
Revised Plan is the most current plan and is the one to which Actual Results should be compared. A
comparison of Actual Results to this plan yields the Over/Under plan calculations in dollar and percentage
amounts. The current outlook column was not included in the original report but should be added to give
management an idea what the results for the year are expected to be.

12. c. Kenbart Company would have to capture the original plan by month for each account in the files. However,
only the monthly sales and fixed expenses would have to be stored because the variable and mixed (semi-
variable) costs could be calculated from the flexible budget equations which can either be stored in data
files or incorporated into the software. Changes in any parameter value can be input into the system as
needed for generating revised or revised flexible plans. To complete actual columns on the report(s),
Kenbart would also have to capture the actual dollar results for the current and prior months by month.
13. a. Sequence coding is the assignment of numbers or letters in some designated consecutive order, i.e., 1,2,3,4
. . . or A, B, C, D . . . The next incident or increment is assigned the next higher sequential designation.
Examples: check numbers, calendar years, purchase orders, etc.

Block Coding assigns specific groups of numbers for designated purposes. Address numbers in cities, e.g.,
100 to 199, are referred to as the 100 block. Accounting systems commonly use blocks of numbers to
specify classes of accounts, 100-200 for assets, 300 for liabilities, etc.

Group Coding consists of two or more subgroups of digits or letters combined in a field to designate
several classifications. Each subgroup specifies a data classification in a series. The series is generally a
left-to-right arrangement with the positions or blocks of designators becoming more specific the further to
the right they are in series. Postal ZIP codes are an example of group coding with each successive digit
indicating an ever more precise geographic location.

13. b. A chart of accounts coding system must satisfy specific requirements. These requirements will dictate the
nature and type of coding used. Among these factors are the following:

$ Organizational considerations. The company’s organization factors need to be considered, i.e., the type and
complexity of business structure; number of divisions, plants, departments; number of product lines,
etc.
$ Type of information requirements. A system user must be able to access information for retrieval by
addressing major groups of data. The composition of the account numbers must allow for easy
identification and use.
$ Growth. The coding must allow for growth in the number of items that will be included in the system. A
one position field in a strictly numeric system can specify no more than ten items or classes; if
alphanumeric, no more than 36. If the items or classes to be identified by the field have the potential to
exceed these limits, the field should be expanded.
Test Bank for Accounting Information Systems, 7th Edition: Cynthia D. Heagy

$ Cost effectiveness. The longer the code designation, the more costly it is to maintain and process the
associated data. A numeric coding system is more efficient in an electronic data processing system. In all
systems, shorter codes are preferable.

13. c. A group coding system would provide the best approach to a sales analysis coding system for Universal
Floor Coverings. The sales analysis code would include the following positions:

Item Identification Digit Explanation

Type of Use 1 Only have two types of use–commercial and residential.
Product 1 Only have three product lines now–carpet, vinyl floor covering,
padding.
Brand* 1 One digit should be sufficient because this is a subcode:
Carpet—5 brands each
Vinyl – 4 brands
Line/pattern* 1 One digit should be sufficient because this again is a subgroup:
Carpet–5 lines maximum per brand
Vinyl–8 patterns per brand
Color 1 or 2 There are a maximum of 15 color styles for the carpet. This would
require two numeric digits or one alphanumeric digit.
Type of Sale 1 One digit would be sufficient to identify wholesale, retail showroom,
corporations, contractors, retail chain and outlet.
Territory 1 There are currently seven territories; one digit is sufficient unless the
company plans to expand the number of territories.
District 1 or 2 Currently there are 10 districts in some territories. This means that 1
digit is sufficient now, but another position or an alpha coding might
be used for expansion.
Specific Customer 4 If sales analysis by customer is desired, then a 4 digit numeric code
Identification should be used to provide adequate expansion.

A digit is not needed for salespersons because only one salesperson is assigned to each district. If this is
due to change in the near future, then a digit should be added now.

All these codes would be numeric except as indicated above.

*The type of pad could be identified under brand or line/pattern.

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