Prepare a Narrative Description of the Sales / Collection Process

question 18

Essay

Prepare a narrative description of the sales / collection process depicted in the systems flowchart below. Then, identify three risk exposures for the company's sales / collection process; for each risk exposure, suggest one internal control you would implement.

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Definitions:

Materials Price Variance

The difference between the actual cost of materials and the expected (or standard) cost, indicating how efficiently materials are being purchased.

Standard Price

A predetermined price that a company aims to pay for materials, labor, and other costs, used for budgeting and performance evaluation.

Raw Material

The basic material from which a product is made, typically unprocessed or minimally processed before being used in manufacturing processes.

Fixed Overhead

Costs that do not vary with the level of production or sales, including rent, salaries, and insurance, ensuring the basic operational capability of a business.