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Lean Principles

lowest purchase prices. The lowest bidder receives the order for the next quarter $(90$ working days$).$

To make its bulb products, Ceiling Stars requires $52,200$ pounds of glass per quarter. Bright Night received two glass bids for the third quarter, as follows:

Provo Glass Company: $$23\mathrm{.}00$ per pound of glass. Delivery schedule: $52,200(580lbs.90$ days$)$ pounds at the beginning of July to last for $3$ months.

Orem Glass Company: $$23\mathrm{.}15$ per pound of glass. Delivery schedule: $580$ pounds per working day $(90$ days in the quarter$).$

Ceiling Stars accepted Provo Glass Company's bid because it was the low$-$cost bid.

a$.$ Yes

b$.$ No

Reason:

a$.$ The policy is effective as it lowers the cost of purchase.

b$.$ The policy considers the quoted price and the quality of the product is ignored.

c$.$ The policy of the company is not practically viable as it is not building long$-$term relationships with its suppliers. The reputation of the company may be affected.

d$.$ Supplier relationships are not required as the products are purchased for the quarter alone.

Identify reason that supports the answer.

a$.$ Yes

b$.$ No

Reason:

a$.$ The cost of storage, obsolescence, material management and wastages are ignored in this concept.

b$.$ The cost of storage, obsolescence, material management and wastages are included in the purchase cost computation.

c$.$ The cost related to quality can be compensated as the price of the material is low.

d$.$ The responsibility of the manager is to get the lowest bid for the product and all other information is irrelevant.

quarterly interest charge, then divide by the number of pounds.$)$ Round to the nearest cent.

$ per lb$.$

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