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Consider the following set of circumstances for a business:

Consider the following set of circumstances for a business:

Materials

SQ         SP   AQ         SP  AQ          SP  AQ          AP

$1,500,000 $1,450,000 $1,375,000 $1,525,000

 

 

MPV = Unfavorable $150,000

MQV = Favorable $50,000

Labour

SQ           SR AQ           SR AQ          AR

$2,650,000 $2,825,000 $3,100,000

 

LRV = Unfavorable $275,000

LEV = Unfavorable $175,000

On investigation, it has been determined that the purchasing department employee bought higher quality materials than the specifications call for, but did not confirm the purchase with anyone nor notify anyone of the higher quality. All of the variances above resulted from this one purchasing decision.


1) Determine what you would do regarding the actions taken by the purchasing department, should the person be terminated, pay for the losses, etc. Be creative.

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