MA512-Master of Professional Accounting

Requirements

This assignment is comprised of two requirements, worth a total of 100 marks. The first requirement must be completed and the second requirement addressed. Each group is required to prepare a business report for Barrett Mann the purchasing manager of Atmel Ltd to assist him in choosing the right vendor for the materials required to complete a customer’s job. Recommendations are to be supported by quantitative, qualitative and ethical analysis based on the data and information provided in the case study.

Case Study

Barrett Mann the purchasing manager for Atmel Ltd is reviewing supply options to complete a customer’s job. Atmel Ltd needs a total of 145 tonnes of sheet –50 tonnes of 5 centimetre width and 75 tonnes of 9 centimetre width to complete the job. Atmel can purchase the sheet steel in these widths directly from Jardensteel Ltd, a steel manufacturer, or it can purchase sheet steel from Jarden Steel that is 49 centimetres wide and then have it slit into desired widths by Parker Pty Ltd. Both vendors are local and have previously supplied materials to Atmel.

Parker Pty Ltd., specialises in slitting sheet steel, provided by a customer, into any desired width.   When negotiating a contract, Parker Pty Ltd tells its customers that there is a scrap loss in slitting operation, but that this loss has never exceeded 3.5 per cent of input tonnes. Parker recommends that if a customer has a specific tonnage requirement, it should supply an adequate amount of steel to yield the desired quantity. Parker’s charges for steel slitting are based on good output, not input handled.

The 49-centimetre-wide sheet steel is a regular stock item of Jardensteel and can be shipped to Parker within five days of receipt of Atmel’s purchase order. If Jardensteel is to do the slitting, shipment to Atmel would be scheduled for 15 days from receipt of the order. Parker has quoted delivery at 10 days after receipt of the sheet steel. In prior dealings Atmel has found both Jardensteel and Parker to be reliable vendors with high-quality products.

Atmel has received the following price quotations from Jardensteel and Parker Pty Ltd.

In addition to the above information, Parker has informed Atmel that if Atmel purchases 100 output tonnes of each width, the per-tonne slitting rates would be reduced by 20 per-cent.

Atmel knows that same customer will be placing a new order in the near future for the same material and estimates it would have to store the additional tonnage for an average of three months at a carrying cost of $1.00 per month for each tonne. There would be no change to Jardensteel’ s prices for additional tonnes delivered to Parker. 

Requirement 

a.Prepare an analysis to determine whether Atmel Ltd should purchase the required slit steel directly from Jardensteel Ltd. Provide all calculations to support your analysis.

b.Analyse the option of Purchasing the 49-centimetre-wide sheet steel from Jardensteel and have it slit by Parker Pty Ltd into 60 output tonnes, 5 centimetres wide 85 output tonnes, 9 centimetres wide. Provide all calculations to support your analysis.

c.Analyse the option of Atmel Ltd taking advantage of Parker’s reduced slitting rates by purchasing 100 output tonnes of each width. Provide calculations to support your analysis.

d.Independent of your answer to above parts, present three additional reasons, reflecting qualitative rather than financial information, as to why Atmel Ltd may favour the purchase of the slit steel directly from Jardensteel Ltd.

e.Suppose Barrett Mann’s final analysis shows that purchasing slit steel directly from Jardensteel is Atmel’s least costly option. Before making his decision, Mann receives a call from a good friend who is the production manager at Parker Pty Ltd. His friend has called to urge Mann to use Parker’s services. ‘We’re really hurting here at Parker, Mann’, his friend insists. ‘If we don’t get this job, it’s going to be a long cold winter for some of us’. Discuss Barrett Mann’s ethical obligations in this matter. (Assume company has a code of conduct which has the fundamental principles such as Integrity, objectivity, professional competence and due care, confidentiality and professional behavior)