Ollie Mace is the controller of SDC, an automotive parts manufacturing firm. Its four major operating divisions are heat treating, extruding, small parts stamping, and screening. Last year's sales from cach division ranged from $ 150,000 to $ 3 million. Each division is physically and independent, except for the constant surveillance - 2.2 I according to the needs and abilities of its ac- counts of Sam Dilley, the firms 7 examples The AIS for each division evaluates to have responsibility for overall financial management. Dilley wants Mace to improve the AIS before he retires in a few years counting staff. Mace is the first redesign of the ta monitor division performance. Mace decides so that it will be limited to the following features: financial reporting is uniform, timely, and accurate reports of business activity. • Ir should give the same uniform across divisions and be completed by the fifth day of the following month to provide enough time to take corrective actions to af- Monthly reports: fect the next month's performance. Company-wide financial reports should be available - Reports should provide a basis for measuring the return on investment for each division. Thus, in addition to revenue and expense accounts, reports should show assets able at the same time. The system should generate meaningful budget data for planning and decision-making purposes. Budgets should reflect managerial responsibility: quality and show costs for assigned to each division. major product groups. Mace helieves that a new chart of accounts is required to accomplish these goals He wants to divide financial statement accounts into major categories, such as assets liabilities, and equity. It does not require more than 10 control accounts within each of these categories. From his observations to date, 100 subsidiary accounts are more than adequate for each control account. No division has more than five major product groups. Mace foresees a maximum of six cost centers within any product group, including both the operating and non-operating groups. He views general divisional costs as a non-revenue-producing product group. Mace estimates that 44 expense accounts plus 12 specific variance accounts would be adequate. REQUIRED Design a chart of accounts for SDC. Explain how you structured the chart of accounts to meet the company's needs and operating characteristics. Keep the total account code length to a minimum, while still satisfying ail of Mace's desires. (CMA Examinalion. Adapted)
Ollie Mace is the controller of SDC, an automotive parts manufacturing firm. Its four major operating divisions are heat treating, extruding, small parts stamping, and screening. Last year's sales from cach division ranged from $ 150,000 to $ 3 million. Each division is physically and independent, except for the constant surveillance - 2.2 I according to the needs and abilities of its ac- counts of Sam Dilley, the firms 7 examples The
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