Amanda Casey, Senior Supply Manager at the Gurrugal District School, sat reflecting on a purchase requisition (P.R.)
Question:
Amanda Casey, Senior Supply Manager at the Gurrugal District School, sat reflecting on a purchase requisition (P.R.) she had just received. The P.R. called for the purchase of 1,000 Model-Ergonomic Excellence (MEE) classroom armchairs, manufactured by the Global Excellence Chair Company. The P.R. was requested by Linda Wong, Administrative Officer, and authorized by Patrick Gougeon, Principal of the school.
A memo attached to the P.R. said that sufficient funds were available and gave details of the account to which it should be charged. A copy of a sales agreement for the chairs was attached. The price was $120 per chair, including delivery cost. Amanda reviewed three other chair suppliers’ catalogs and learned that nearly identical chairs were available at prices ranging from $60 to $70 which also included delivery costs if more than 100 chairs were ordered.
Amanda called Linda and asked whose idea it was to specify the MEE chairs, mentioning that this chair was nearly double the price of the other three comparable chairs. Linda responded that this had been decided at last week’s senior management meeting, chaired by Mr. Gougeon who had said that the school should buy the best there was for the students.
Amanda thanked Linda for the information. She was upset and angry that she had not been invited to join the senior management meeting where this decision had been made. Something did not seem right. Amanda was concerned that the school, which was funded by tax payer money, was being careless and irresponsible with the funds. But she also felt powerless to do anything about it.
Required
- What courses of action are open to Amanda and what are the advantages and disadvantages of each?
- Do you think that Mr Gougeon was right in making that decision? What advice would you give Mr Gougeon?
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher