Cleveland Glass Company: $28.20 per pound of glass. Delivery schedule: 500 pounds per working day (90 days in the quarter).-

Soft Glow accepted Mid-States Glass Company’s bid because it was the low-cost bid.

Instructions 1. Comment on Soft Glow’s purchasing policy.

2. What are the additional (hidden) costs, beyond price, of Mid-States Glass Company’s bid? Why weren’t these costs considered?

3. Considering just inventory financing costs, what is the additional cost per pound of Mid-States Glass Company’s bid if the annual cost of money is 10%? (Hint: Determine the average value of glass inventory held for the quarter and multiply by the quarterly interest charge, then divide by the number of pounds.)