Question

Glow Bright Co. manufactures light bulbs. Glow Bright's purchasing policy requires that the purchasing agents place each quarter's purchasing requirements out for bid. This is because the Purchasing Department is evaluated solely by its ability to get the lowest purchase prices. The lowest cost bidder receives the order for the next quarter (90 working days).

To make its bulb products, Glow Bright requires 61,200 pounds of glass per quarter. Glow Bright received two glass bids for the third quarter, as follows:

• Mid-States Glass Company: $25.00 per pound of glass. Delivery schedule: 61,200 (680 lbs. x 90 days) pounds at the beginning of July to last for 3 months.
• Akron Glass Company: $25.15 per pound of glass. Delivery schedule: 680 pounds per working day (90 days in the quarter).

Glow Bright accepted Mid-States Glass Company's bid because it was the low-cost bid.

1. All of the following are ways in which Glow Bright could develop long-term partnerships with its suppliers except:

1. share research and development efforts.
2. ignore internal costs caused by delivery delays while contracting on the best price point basis.
3. share production schedules.
4. establish electronic data interchange.
5. establish supplier raw materials logistical support.

2. Hidden costs beyond the price of Mid-States Glass Company's bid include all of the following except:

3. Considering just inventory financing costs, what is the additional cost per pound of Mid-States Glass Company's bid if the annual cost of money is 8%? Round to the nearest cent.
$ per lb.

Answer 1

1. All of the following are ways in which Glow Bright could develop long-term partnerships with its suppliers except:
share research and development efforts.
ignore internal costs caused by delivery delays while contracting on the best price point basis.	Correct Option
share production schedules.
establish electronic data interchange.
establish supplier raw materials logistical support.
It can work with the supplier on quality, responsive delivery, electronic data interchange invoicing, supplier raw materials logistical support, sharing of research and development efforts, and sharing of production schedules etc.
2. Hidden costs beyond the price of Mid-States Glass Company's bid include all of the following except:
The hidden costs are incurred by other parts of the organization, not purchasing
The hidden inventory costs include additional space, handling, obsolescence, financing, and materials management costs. These costs were not considered because they are not obvious and are also difficult to determine.

Average frames in inventory for the quarter = (61200/2)	30,600.00
Total Investment (30600 x $25 per pound of glass)	765,000.00
Interest rate per quarter =(8%/4) =	2%
Inventory financing per quarter = 765000 x 2%	15,300.00
÷ Pounds  of frames ordered for the quarter	61200
Additional cost per pound	$          0.25	per pound