Question

Below is the information provided to you by Ms Lisa James, the CEO of Platinum Manufacturing Group Platinum Manufacturing Group (Platinum) are a medium sized manufacturer of electrical equipment. Their primary customers are small to medium sized businesses around Australia. Their annual turnover in the last 12 months was $3.5 million, growing from $1m only 2 years ago. Due to the growth of the business, Platinum have hired you to review their system for the purchase, receipt, storage, and issuance of raw materials. Ms James has already had some basic discussions with key staff and has provided you with the detail below: Storeroom: The storeroom is run by the Storeroom supervisor and three staff. The storeroom is locked with Storeroom staff requiring a password to access the room. The primary raw materials kept in the storeroom are high cost electrical components, which are often small in size. Raw materials are removed from the storeroom only upon written or oral authorisation by a production supervisor. Ordered materials: Ordered materials are delivered directly to storeroom staff. The staff members count all items received and check that the count agrees with the details on the packing slip received with the goods. The packing slip is then initialled, date stamped and used as a receiving report for the order. The stamped packing slip is scanned and emailed to the purchasing team who file it with the purchase order. The stamped packing slip is placed in a file on a shelf in the storeroom. Purchasing team: The purchasing team clear their emails at the beginning of each day. All stamped packing slips are printed and reviewed with the following possible outcomes:  The packing slip is matched to a valid purchase order found in the Open Purchase Order file – it is filed in the filled purchase orders file pending receipt of a valid tax invoice for payment.  The packing slip does not have a corresponding purchase order - it is filed in an outstanding items file and followed up at the end of the month.

The quantity or items on the packing slip are different to the approved purchase order - it is filed in an outstanding items file and followed up at the end of the month. Purchasing team: The purchasing team also receive the invoice directly from the supplier. All invoices are paid on the due date and filed with the purchase order and packing slip to be reconciled at the end of the month Inventory System: Platinum have not implemented a perpetual inventory system. Storeroom staff are therefore not required to keep records for the goods received or issued. To manage this, inventory is reconciled at the end of each month when the storeroom staff perform a physical inventory count. Ordering of raw materials: The Storeroom supervisor uses the physical count to match quantities on hand against Platinum’s predetermined reorder level. If the count is below the reorder level, the supervisor enters the items inventory number on a materials purchase requisition list that is emailed to the purchasing area. Purchasing raw materials: Upon receipt of a materials requisition form, the purchasing team prepares a purchase order for each item on the list and emails it to the supplier from whom Platinum last purchased the item. A copy of the Purchase order is retained in the Open Purchase Orders file.

A summarised overview of the expenditure process relating to the purchase, receipt, storage and issuance of raw materials. (1 mark) [This should be no longer than one (1) paragraph and need to focus on the key relevant facts. The CEO is already aware of this information, but this overview helps bring your report together for other readers]

Answer 1

This is to review the system for the purchase, receipt, storage, and issuance of raw materials of Platinum Manufacturing Group.

1...Initiation of a purchase order

Ordering of raw materials:The Storeroom supervisor compares the physical count of materials & their respective predetermined reorder level. When he finds the count less than the reorder level,he places a materials purchase requisition list (via e-mail) to the purchase section.

Purchasing raw materials: Upon the receipt of the   above materials requisition form, the purchasing section prepares a purchase order for each item on the list and emails it to the supplier from whom Platinum last purchased the item. A copy of the Purchase order is retained in the Open Purchase Orders file.

2….Receipt of ordered materials:

By store room staff: Ordered materials are delivered directly to storeroom staff--who physically count all the received items & tally with the accompanying packing slip. The packing slip is subsequently initialled, date stamped and that stamped packing slip is the receiving report for that order. The same ( stamped packing slip) is scanned and emailed to the purchasing section who file it with the purchase order. The original stamped packing slip is placed in a file on a shelf in the storeroom.

Counter-checking by the Purchase Section:

The purchasing area people attend to their emails at the beginning of each day.

All the stamped packing slips received from store-room via e-mails are printed and reviewed with the following 3 possible outcomes:

Those that can be matched to a valid purchase order found in the Open Purchase Order file , are filed in the filled purchase orders file ---pending receipt of a valid tax invoice(from the supplier) for payment.

Those that do not have a corresponding purchase order to be matched with,are filed in an outstanding items file and followed up at the end of the month.

Those whose quantity or items vary with that on the approved purchase order , are also filed in an outstanding items file and followed up at the end of the month.

3….Storage of received materials

Storeroom is managed by one storeroom supervisor and three staff. The storeroom is kept under lock & key with even the Storeroom staff requiring a password to access the room. They store primarily high -value ,but small -quantity electrical components.

All received materials can be traced to the original stamped packing slip-file on a shelf in the storeroom.

4… Issue of raw materilas to production:

Raw materials are issued from the storeroom only upon written or oral authorisation by a production supervisor.