Learning Objective: 13-01 Discuss the importance of purchasing.
38.
Fully integrated production networks aid U.S. companies in global operations.
Learning Objective: 13-01 Discuss the importance of purchasing.
39.
Stockouts reduce inventory excesses and increase profits.
Learning Objective: 13-01 Discuss the importance of purchasing.
40.
The responsibility for purchasing should be assigned to several people in a company to get
the best quality items.
41.
Most small businesses are successful in purchasing when they use a single source of
supply.
42.
Businesses that use a single source of supply for a material receive better service from the
supplier than those that use many sources of supply.
43.
Suppliers should be chosen on the basis of price alone.
44.
Suppliers should be chosen to meet carefully set quality and service standards.
45.
Small businesses should develop a rating system to select, evaluate, and retain suppliers.
46.
The amount of inventory after the sale of a finished product should be in balance with
customer demand to minimize total costs.
47.
Issuing purchase orders creates legal records of purchase.
48.
Standing orders simplify the purchasing procedure and allow for long-range planning.
49.
High quality tends to result in lower production costs.
50.
Receiving ordered goods and placing them in inventory are the last steps in the purchasing
procedure.
51.
There is no way to avoid carrying inventory, so the best an owner can do is manage its
movement and control its costs.
52.
The reason for carrying inventory is to disconnect one segment of the operating process
from another so each part can operate at its optimum level.
53.
Supplies for use in offices and shops should not be counted as inventory.
54.
According to the 80-20 rule, approximately 20 percent of a company’s income comes from
80 percent of its products.
55.
Opportunity costs are profits lost because money is tied up in inventory.
56.
An ideal inventory level exists when items arrive just in time for sale to customers.
57.
It is impossible to determine the optimum lot size for items a company produces for itself.
13–32
58.
The economic order quantity is determined by balancing the cost of placing an order with
59.
Small businesses should never subcontract production to deal with seasonal variations in
demand.
60.
Scheduling is setting the times and sequences needed to perform specialized activities.
Essay Questions
61.
Explain why purchasing is important to a small business.
62.
Explain what is involved in the purchasing process.
63.
What are the current trends in purchasing that are causing problems for small business
owners?
64.
Explain why only one person should be assigned the responsibility of purchasing.
While capable subordinates, such as specialty buyers, may be delegated the authority to
order in their areas of expertise, in general one person should be given the overall
purchasing responsibility. But that person should ask for—and get—the help of people
knowledgeable in areas such as engineering and planning.
Those doing the purchasing should be aware of trends and special situations that can
affect operations and should call situations such as the following to their attention:
65.
Explain why price should not be the only factor when choosing a supplier.
66.
How can an effective purchasing system be set?
67.
How can a small business control inventory?
68.
Which types of inventories do small firms carry? What is an ideal inventory mix?
69.
Summarize the costs of carrying inventory.
70.
Define the term “quality.” How is it significant to a small business owner?