A supplier, Maxim Production Factory (MPF) manufactures baking powder to be supplied to retailers, while also accepting order through online sales.

A canteen operated by the education department would buy baking powder from MPF for the production of its local bread and cuisine.

The supplier, MPE would normally sell at cost plus 80 percent of the total costs to customers.

The education canteen operator maintains a trading policy that any reduction in the selling price of MPF will either be at par or not less than the price offered by new supplier, Rambun Enterprise.

It was also noted that the indirect cost - business sustain support cost for MPE has reached its maximum capacity

Rambun Enterprise will supply at a price of RM4.60 per packet kg of baking powder.

The following amounts reflect the in-house manufacturing costs of baking powder per packet kg of MPE.

Direct Costs:	RM
Direct materials	0.80
Direct labour	0.40
Unit-related support costs	0.20
Batch-related support costs	0.50
Indirect Costs:
Product-sustaining support costs	0.80
Business-sustaining support costs	0.30
Total cost per packet kg	3.00

Required:

1. Should the company continue to buy from Maxim Production Factory the baking powder? Why or why not? Discuss all items that should be considered. (12marks)

2. What incentives can the company offer to its supplier of the baking powder to encourage sustainable supply? (4 marks)

3. Explain the strategies the company has to put in place to ensure good suppliers relationship at the work place. (6 marks)

Answer rating: 100% (QA)

Should the company continue to buy from Maxim Production Factory the baking powder Why or why not Discuss all items that should be considered Yes the company should continue to buy from Maxim Producti... View the full answer