FAO Purchasing
COST TABLES
Exercise
Problem: Purchasing has been asked to buy sweets for a Board Meeting. The dessert will be used in celebration of Ford’s superior
market performance. We have been told that a key Board Member is constantly on the lookout for inefficient spending … and our dessert
purchase price could be challenged for its competitiveness. Therefore, our challenge is to buy the most dessert for the money and
be prepared to prove it to the Board of Directors.
Instructions
The facing page details dessert/icing quotation summaries from five qualified sweets manufacturers. Our job is to find the best dessert buy for
Ford. The best buy is defined by obtaining the most dessert for the least amount of money.
A. Calculate the “price per pound” for each dessert. Input answers in Section “A” of the facing page.
B. Plot the “price per pound” for ach of the five desserts on the graph marked “B”.
Questions
1. Which dessert Supplier has the lowest price per pound as indicated by the graph?
2. What is the “cost gap” dollar amount between the lowest and highest priced dessert?
3. If the high price dessert was adjusted to the most competitive “price per pound”, what percent savings would you request?
4. What cost drivers would you ask the high cost dessert Supplier take a look at to improve his/her pricing?
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6. Extra Credit Challenge
7. What would be the lowest cost three (3) pound dessert your could create based on the best in class cost structure?
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