CarmenA., the supervisor of purchasing operations, is responsible for buying needed materials at the most favorable delivered prices for the Long Manufacturing Company. She is evaluated on the basis of net materials price variances each month. Harlan D., the production supervisor, is responsible for producing the company’s products in the de- sired quantities, attaining appropriate quality standards, and meeting the production schedules that have been adopted. He is evaluated on the basis of net direct materials quantity variances for all materials used each month as well as direct labor efficiency and overhead budget variances.

During January, Carmen obtained a 30% quantity discount off a slightly lower than standard price for a one year’s supply of dingers from a new supplier. Normally, dingers are purchased in much smaller quantities. Dingers are critical to the quality of several of the company’s products and to the efficiency of direct materials and direct labor usage in several manufacturing processes. The dingers purchased by Carmen in January are of inferior quality.

Required: Discuss the effects that the January purchase of inferior dingers will have on the performance evaluation of both Carmen A. and Harlan D. and the likely effects on company profit. Suggest a way to change the performance evaluation system so that it might be more fair to the individuals involved and might improve company profitability as well.

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