Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 33

Purchases Budget and Payments Janet DeVolris, purchasing manager of Corkin Manufacturing, a small Midwest manufacturer of specialty tools, was frustrated because her efforts to reduce the use of expensive overnight shipping appeared to be futile. Rush orders, last-minute changes, and other operating emergencies seemed to be the firm’s way of life. Although she vowed to keep last-minute actions to a minimum, overnight shipping shows no sign of abatement after six months.

At a recent convention, several suppliers mentioned that Corkin Manufacturing rarely takes advantage of the discount terms she worked so hard for them to grant. She was very surprised because sales terms of 2/10, n/30 or better yielded an annual return of at least 36 percent.

Tony Blair, the firm’s CEO, recently praised Janet lavishly for her performance for the last six months and gave her a generous raise. Still, she feels frustrated and unfulfilled.

Required What could Janet do to overcome her frustration?

Step 1 of 2

Cash disbursement is the cash payment made by the individual or the company is a specified period of time which could be week, month, year etc. These payments are made against the purchases made by firm or the operating expense which occur. Discounts are the percentage decrease in payment that can be made if payment is done in pre-fixed time period.