Bella Beauty Products is a retailer selling various hair, skin, and other beauty products. Bella Beauty Products is owned and operated by Vanessa Domingo. The company has three retail locations. Each retail location both sells products at the store and ships products through an online sales system.

The company prides itself on its outstanding customer service. The company’s historical rate of sales returns to sales is approximately 4%, which is well below the industry average. Vanessa believes this is evidence of their superior customer service.

Bella Beauty Products allows any employee on duty to accept sales returns from customers. The customer can elect to receive cash back on a product return, even if the original sale was made with a customer credit card. 

The company’s accounting system records the sales return electronically. No supporting documentation for sales returns are maintained.

Recently, Vanessa has become concerned with the level of sales returns at one of the locations. She asked her controller to prepare a graph comparing sales and sales returns at that location. The controller’s graph is presented below.

INSTRUCTIONS

1. Calculate the percentage of sales returns to sales for each month in the graph.

2. Have sales returns, as a percentage of sales, increased or decreased monthly?

3. By what percentage has sales returns, as a percentage of sales, increased from the month of January to the month of June?

4. How can Bella Beauty Products improve internal controls over sales returns?

Transcribed Image Text:

16,000 14,000 - 12,000 10,000 9,000 8,000- 6,000- 4,000 - 2,000- Sales Sales Returns 360 Jan 9,000 540 Feb Sales and Sales Returns 11,000 704 March 12,500 875 April 14,000 1,050 May 14,500 1,102 June