Bob Haskins is purchasing manger for regal products . Each year Regal products builds, a master budget Bob is liable for making a purchasing budget, which he bases on budgeted level of production. Bob carefully plans purchasing cost and raw material inventory levels to meet production requirements.
Each year, Yvonne Lang, president of Regal products, carry out performance, estimation, and bonuses area paid to main employees, comprising Bob, based on meeting budget results. For Past two years, Bob had received small bonus and as been chided by Yvonne for poor planning, specifically, Yvonne has indicated put purchasing department has not maintained. Sufficient levels of raw material inventory as is always in rush to get sufficient levels of raw material inventory and is always in rush to get material, resulting in increased shipping and handling charges. Should frequently pay premium amounts for immediately shipment of materials. In her most recent estimation, Yvonne stated to Bob. Sales department and production department are doing excellent Job. They consistently exceed their budget by 10% or more. I just don't understand why you can't meet your numbers, may be it is time to for some changes around here.
After getting childed by Yvonne Bob went back and look at his budget, He knew he had ordered amount by budget. budget for January and February is as follows.
Unit sales 300,000 350,000
Add desired ending inventory 35,000 25,000
Subtotal 335,000 375,000
less budget inventory 30,000 35,000
Budgeted production 305,000 340,000
Pounds of Raw material per unit 1.1 1.1
Required pounds of raw material 335,000 374,000
Add Desired ending inventory of raw 37,000 27,5Y00
Less beginning inventory of raw material 33,550 37,400
Total of Raw Material need ( pounds) 339,350 364,100
A. If less sales were 10% higher than budgeted, how many pounds of raw material would Bob require to rush orders each month so he can fulfill demand and needed ending inventory as shown in budget.
B. why does it seems the purchasing department is having trouble meeting it budget.
C. It is suitable to blame BOB for all of purchasing problems?
D. IF Yvonne does make some changes: what changes would you recommend she consider?