Kretzinger Company Makes Extensive Use of Financial Performance Reports for Each

question 61

Essay

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:
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?

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Definitions:

Intentional

Actions or behaviors that are done with purpose or deliberate intent, often reflecting a specific goal or outcome in mind.

Prejudice

A negative prejudgment about a person or group that is irrational, long-lasting, and not based on fact.

Assimilation

The process through which individuals or groups adopt the cultural norms of another group, often losing their original identity or culture.

Cultural Identities

The identity or feeling of belonging to a group, influenced by one’s culture, encompassing language, traditions, customs, and shared beliefs.