Accounting Information Systems 7th Edition by Cynthia Heagy,Constance Lehmann

Exercise 10

Universal Floor Covering is a manufacturer and distributor of three floor covering products-carpet, vinyl, and padding. The home office is located in Charlotte, North Carolina. Carpet mills (i.e., manufacturing plants) are located in Dalton, Georgia, and Greenville, South Carolina. A vinyl floor covering manufacturing plant is in High Point, North Carolina. Total sales last year were just over $250 million.
The company manufactures more than 200 different varieties of carpet. The carpet is classified as being for commercial or residential purposes and is sold under five brand names with as many as five lines under each brand. The lines indicate the different grades of quality; grades are measured by type of tufts per square inch. Each line of carpet can have as many as 15 different color styles.
The company manufactures slightly less than 200 varieties of vinyl floor covering. This product is also classified as being for commercial or residential use. The company has four separate brand names (largely distinguished by the type of finish), as many as eight different patterns for each brand, and as many as eight color styles for each pattern.
The company manufactures 10 different grades of padding. The padding is usually differentiated by intended use (commercial or residential) in addition to thickness and composition of materials.
Universal serves over 2,000 wholesale customers. Retail showrooms are the primary customers. Many major corporations are direct buyers of Universal's products. Large construction companies have contracts with Universal to purchase floor covering products at reduced rates for use in newly constructed homes and commercial buildings. In addition, Universal produces a line of residential carpet for a large national retail chain. Sales to these customers range from $10,000 to $1,000,000 annually.
Each plant has a company-owned retail outlet store. The outlets carry overruns, seconds, and discontinued items. This is Universal's only retail sales function.
The company has divided the sales market into seven territories, with the major concentration on the East Coast. The market segments are New England, New York, Mid-Atlantic, Carolinas, South, Midwest, and West. Each sales territory is divided into 5 to 10 districts, with a salesperson assigned to each district.
The current accounting system has been adequate for monitoring the sales by product. However, there are limitations to the system because specific information is sometimes not available. A detailed analysis of operations is necessary for planning and control purposes and would be valuable for decision-making purposes.
Required:
Account coding systems are based on various coding concepts.
a. Briefly define and give an example of the following coding concepts:
Sequence coding
Block coding
Group coding
b. Identify and describe factors which must be considered before a coding system can be designed and implemented for an organization.
c. Design a code to assign to each sales transaction that would permit Universal to prepare sales analyses that reflect the characteristics of the company's business. For each portion of the code:
Explain the meaning and purpose of the position.
Identify and justify the number of digits required.
[CMA adapted]
Partial solution to get you started: