Supplier Costs Analysis & Supplier Performance Measures – Accounting & Finance Assignment Help

Assignment Task

Task 

P15.33 Supplier costs analysis; supplier performance measures; supplier selection: builder

Jacaranda Builders is undertaking an analysis of supplier costs in order to evaluate the relative costs and performance of each supplier. They have isolated a range of activities that are consumed by suppliers, identified activity drivers, and estimated the cost per unit of activity driver for last year:

Required
1. Calculate the total cost of ownership for each of the three suppliers.
2. Determine the supplier performance index for each supplier.
3. Discuss the relative performance of each supplier.
4. Do you have any recommendations on supplier selection for the management of Jacaranda Builders?

E13.28 ROI and EVA: service firm
Ready Rentals Ltd consists of two divisions. The equipment rental division rents machinery, such as cement mixers and scissor lifts, to building contractors. The truck rental division rents forklift trucks and removal trucks.

The financial results for the two divisions for the most recent year are as follows:

Ready Rentals obtains its financing from long-term debt and shares, and the weighted average cost of capital is estimated to be 6%. To calculate ROI, invested capital is defined as total assets less current liabilities.

Required
1. Calculate the ROI for the two divisions.
2. Calculate the EVA for each division.
3. Which division has performed better? Explain your answer.

P1.38 Behavioural issues; ethics
Janet Kaniva is the head of the sales department for a large book distributor. She manages a team of five salespeople, including her close friend, Ima Lyer. Each salesperson is responsible for particular product lines and is entitled to receive an annual salary bonus provided that he or she exceeds the profit forecast for his/her product group by more than 10%. Profit for each product group is estimated by deducting from sales revenue the cost of the books sold, plus a charge for corporate overheads. Corporate overheads are allocated as a percentage of sales revenue, using a complex formula based on different percentages of revenue for different product lines; and salespeople can never make any sense of their annual overhead charge.

As the year end approaches, Lyer who sells religious and philosophical texts, learns from the accountant, Stanley Riteous that she will not receive a bonus, as she will not achieve her annual profit forecast. She is feeling very frustrated, as she has heard that the rest of the sales team will come in more than 20?ove their forecast.
Lyer approaches Riteous suggesting that an accounting entry is made to move some of the overhead charges to the other salespeople, who, after all, will still earn their bonus. Riteous refuses on the grounds that he is a CPA, but he is subsequently instructed by Kaniva to make this journal entry.

Required:
1. Explain how the bonus systems is leading to unintended behaviouraloutcomes.
2. What relevance does Riteous’ CPA status have to thissituation?
3. How should Riteous respond to Kaniva’s instruction to move overhead charges from Lyer to the other salespeople? Explain your answer.

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