Tutorial 2 Purchasing Process

Question 1

Types of purchasing

Answer 1

Technical - technical installations, machinery, raw materials

• technical specification
• purchasing department serve technical management

Commercial purchase - fashion items food

• price and customer attractiveness
• PD serve commercial management

Administrative purchase - auxiliaries and materials, office supplies

• follow correct procedures
• PD head of purchasing

Question 2

Info needs

Answer 2

Purchasing costs

Price variances

Contracts concluded

Proposals received

Orders places, orders to be received

Reliability of suppliers

Question 3

Steps in purchasing process

Answer 3

Impulse

Supplier selection

Order

Receive goods or services

Receipt invoice

Question 4

Impulse

Answer 4

1) a signal that the supply system has reached the order level
2) a purchase request by another department not linked to the inventory system
3) signalling an opportunity in the market to b enable to do a good deal

Question 5

Supplier selection

Answer 5

A ) requesting proposals
B) receipt of proposals
C) choice of supplier and conclusion of the contract

Question 6

Order

Answer 6

After concluding the contract with the preferred supplier in which price and other contract terms are stipulated

An employee of the purchasing department will be able to place the order

The data of which will have to be entered into the purchase master file

Question 7

Risks

Answer 7

Risk of paying a higher price than necessary

Risk of receiving less or inferior products/ services than ordered

Fraud by a purchasing employee

Question 8

Most relevant preventative Controls

Answer 8

Forecasts and budgets :
-purchasing budget as a standard to compare actual purchasing costs, quality requirements, standard prices

Segregation of duties :
-between the purchasing department (authorising function), the warehouse (function of custody ) and the accounting department (recording and checking )

Procedures and guidelines :
For requesting proposals, concluding contracts, checking invoices

Question 9

Detective controls

Answer 9

Analytical reviews :
-Such as purchasing costs v budget, price variances

Reconciliations:

Decrease purchase order file = increase inventory file + price variances = increase accounts payable file

Detailed checks :
Invoice check (accuracy of prices and quantities received)