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See attached document for explanation of problem.;Kretzinger Company makes extensive use of financial performance reports;for each of its departments. Although most departments have been;reporting favorable cost variances with the company's current inventory;system, management is concerned about the overall performance of the;purchasing department. For example, the following information is for the;purchasing of materials for a product the company has been manufacturing;for several years;Purchase Year Quantity Used Average Inventory Price Variance;20X1 40,000 8,000 $ 1,000 F;20X2 60,000 15,000 10,000 F;20X3 60,000 20,000 12,000 F;20X4 50,000 12,500 20,000 U;20X5 54,000 18,000 8,000 F;20X6 58,000 23,200 9,500 F;Required;a. Compute the inventory turnover for each year. Can any conclusions be;drawn for a yearly comparison of the purchase price variance and the;inventory turnover?;b. Identify problems likely to be caused by evaluating purchasing only;on the basis of the purchase price variance.;c. What recommendations will improve the evaluation process?

 

Paper#27487 | Written in 18-Jul-2015

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