Required:

Draw an REA diagram for the revenue cycle at ABC. You should include all entities, relationships and cardinalities.

Number each pair of minimum and maximum cardinalities in your drawing. On a separate sheet of paper, describe in words what each number means.

Q. How do you contact customers and how do customers contact you?

A. When we started our business, Jim Adams collected a list of ABC stores nationwide. We sent our product list to more than 20 potential customers. Two of our employees work full-time as salespeople (Scott Smith and Martina Voss).

They call and/or visit assigned customers and complete the order forms with the customer. Last week Martina had orders from Lansing, Michigan and Cleveland, Ohio. Other customers order from our product list and mail or fax orders without assistance from Scott or Martina. Scott and Martina are responsible for more than 80% of the orders.

An order can only have one salesperson assigned to it. We record exactly one customer for each order. Obviously, more than one order can be recorded for the same customer. Jim maintains the customer list herself. In early November, we hired Ginger Nelson as a third salesperson. During the first week of November, she entered orders into the computer, wrapped chocolates and cleaned the coating machine. During the second week of November, she was assigned customers and started taking orders for chocolates.

Q. What do order forms look like?

A. For an order, we need the following data: a unique order number, the customer name, the customer purchase order number, the customer telephone number, the order date, the date required, the customer billing address and the customer shipping address.

When applicable, we also include shipping instructions. When a salesperson is involved, we record the employee code. An order form has many order lines. Each order line contains the following information: item (product code), unit price (price), quantity, line total and comments. An order must have at least one order line completed. That is, a customer must order at least one product for each order.

Q. What information is recorded about sales (or shipments)?

At ABC, we distinguish between order and sales/shipment. A sale occurs once goods are shipped so the two terms are used interchangeably to represent the same event. In general, we require at least two to three days before we can ship the chocolates. Our production plan is fixed for two weeks. Therefore, we sometimes do not have the full quantity ordered in stock for the customer. In this case, send all the chocolate that we have and send the rest of the chocolate when it is ready.

We have to record explicitly the actual quantities shipped for each product. We also record the actual price for each product on each invoice line. When there is a long delay, we sometimes give a small discount. There are no sales without products. We can ship multiple orders at a time. Additionally, we have walk in customers, resulting in sales without an order.

Q. What information is recorded about products?

A. We do not record information about individual items of a specific product. We record information about product types. BCC has seven product types. It must be possible to record product information without recording an order for that product. We also need to know where a product is located in the warehouse. Each of the seven products types has its own area in the warehouse. When a product is out of stock, we record zero as quantity for its area. The warehouse has 10 areas. The three extra areas are used when an area designated for a specific product is full. Each of these extra areas can contain several product types.

Q. What are the payment options?

A. Customers have different payment options. Customers sometimes pay for many sales at one time. Customers may pay at the end of the month. For example, customer Lansing City Zoo paid at the end of October for October sales and at the end of November for November sales. We also allow installment payments, but not prepayments. We record the customer involved in a cash receipt (there is exactly one). There is exactly one employee handling each cash receipt (receiving and recording). Currently, we have two employees who take care of cash receipts (Peter Shark and Werner Braun). An employee can be recorded as a cashier before handling cash receipts.

Q. What do you do with the money?

A. Currently we have one bank account. We opened that bank account the day before we received the money from the shareholders. Every cash receipt is deposited into that account. Exactly one account is recorded for each cash receipt.