Engleside Components produces testing equipment for medical devices. Recently, one of the company’s usual suppliers was unable to fill an order, so the purchasing manager chose a supplier who had been approved. The price was significantly higher than the original supplier and the variance in manufacturing costs was charged to the purchasing department. Working with the new part turned out to be much easier than with the initial part and the labor required was significantly lower. The production department was credited with the favorable variance on labor costs.
The purchasing manager argues that the purchasing department should receive some or most of the credit for the labor savings because it was their choice of vendor that resulted in using the new part. The production manager responds that the system is consistent with how variances have been assigned in the past.
Required
Write a short memo to the plant manager explaining how you would assign responsibility.
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