Answer the following based on the above: 1. Why did Brandon Faust purchase the l
ID: 2533896 • Letter: A
Question
Answer the following based on the above:
1. Why did Brandon Faust purchase the large quantity of raw materials?
2. Do you think this behavior was the objective of the price standard? If not, what is the objectives?
3. Suppose that Brandon is right and that the only way to meet the price standards is through the use of quantity discounts. Also, assume that using quantity discounts is not desirable practice for this company. What would you do to solve this dilemma?
4. Should Brandon be fired? Explain your reasoning?
Ch. 10 Standard Costing & Variance Analysis Variances and Ethics in the Workplace Paige Jamieson was furious. She was about ready to fire Brandon Faust, her purchasing agent. Just a month ago, she had given him a salary increase and a bonus for his performance. She h been especially pleased with his ability to meet or beat the price standards. But now, she found out that it was because of a huge purchase of raw materials. It would take months to use that inventory, and there was hardly any space to store it. In the meantime, space had to be found for the other materials supplies that would be ordered and processed on a regular basis y, it was a lot of capital to tie up in inventory-money that could have been used to help finance the cash needs of the new product just coming online. Her interview with Brandon was frustrating. He was defensive, arguing that he thought she wanted those standards met and the means were not important. He also pointed out that quantity purchases were the only way to meet price standards. Otherwise, an unfavorable materials pric variance would have been realized. Required:Explanation / Answer
He might have purchased large quantity of raw materials to avail the benefit of low price on Bulk purchase. While making bulk purchase, it is common that the price will be cheap and he can meet the price standard. I don’t think it is because of price standard, he needs to buy the required quantity at standard price. That is meant by price standard. It is not about getting the goods at a fixed price, it is about getting the required goods at required time at reasonable price. Getting large volume of unwanted goods at a fair price is not an effective purchase management If the only way to meet the price standard is to maximize the purchase, he might have discussed with the management and avail a good place to store the additional raw material he bought on cheap rate for using it gradually. I think Brandon to be fired. Because he gave the company very much difficulty on handling the fund and space blocked because of unwanted purchase he made only to keep the price standard for his material. He should have discussed with management regarding the same before doing such an unwanted purchase. The company has alternative and economical usage plan regarding both fund and space he wasted. They might have invested the fund in some other products and used the space to store other raw materials. Considering these, It is advisable to fire Mr: Brandon Faust.