FNG Corporation Employs 4 Purchasing Agents

question 108

Multiple Choice

FNG Corporation employs 4 purchasing agents. Rick processes purchase orders for vendors starting with the letters A through H, while Merrill does the same task for vendors from I through N. Esteban deals with vendors in the O through R range, and Kathy handles the rest of the alphabet. The most likely cost driver for the purchasing agents' salaries is the:

• A) Number of vendors within each alphabetical segment
• B) Number of purchase orders processed each month
• C) Average dollar amount of each purchase order
• D) Number of product lines FNG produces

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Definitions:

Derived Demand

A demand for a commodity or service that arises from the demand for another commodity or service, for example, the demand for steel being derived from the demand for cars.

Containers

Objects or spaces that are designed to hold, store, or transport goods and materials.

Competitive Bids

Offers submitted by several suppliers or contractors to complete a specific job or supply goods at competitive prices.

Organizational Buying

The process by which businesses or institutions purchase products or services for use in production, operations, or resale.