Forward Corporation is a progressive and fast-growing company. The company's executive committee consists of the president and the four vice presidents who report to the president-marketing, manufacturing, finance, and systems.

The company has ordered a new computer for use in processing its financial information. Because the computer acquisition required a substantial investment, the president wants to make certain that the computer is employed effectively.

The new computer will enable Forward to revise its financial information system so that the several departments will get more useful information. This should be helpful especially in marketing because its personnel are distributed widely throughout the country.

The marketing department is organized into nine territories and 25 sales offices. The vice president of marketing wants the monthly reports to reflect those items for which the department is responsible and can control. The marketing department also wants information which identifies the most profitable products; this information is used to establish a discount policy which will enable the company to meet competition effectively. Monthly reports showing performance by territory and sales office also would be useful.

The vice president of finance has recommended that the accounting system be revised so that reports would be prepared on a contribution margin basis. Further, only those cost items which are controlled by the respective departments would appear on their reports. The monthly report for the manufacturing department would compare actual production costs with a budget containing the standard costs for the actual volume of production. The marketing department would be provided with the standard variable manufacturing cost for each product so it could calculate the variable contribution margin of each product. The monthly reports to the marketing department would reflect the variable contribution approach; the reports would present the net contribution of the department calculated by deducting standard variable manufacturing costs and marketing expenses (both variable and fixed)from sales.

A portion of Forward Corporation's chart of accounts is shown below.

The company wants to retain the basic structure of the chart of accounts to minimize the number of changes in the system. However, the numbering system will have to be expanded in order to provide the additional information that is desired.
{Required:}
The coding structure now in effect must be modified to satisfy the needs of Forward Corporation's management. Using the marketing areas as the example, devise an account number coding system which will permit the preparation of the contribution reports for the marketing department. In the presentation of the account number coding system.
(1) Add additional accounts to the chart of accounts as needed.
(2) Provide flexibility in the coding structure so that it would not have to be revised completely should Forward Corporation expand or restructure its sales area.
(3) Explain and justify the coding structure presented.

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Account Number Description 2000 Sales 2500 Cost of sales 3000 4000 5000 6000 Manufacturing Engineering expenses Marketing expenses Administrative expenses