A team of internal auditors developed the following finding, except for their recommendation:

Required:

a. Evaluate the following alternative recommendations for this case. Justify your answers in terms of the criteria outlined in the chapter.
1. Production’s management should consider the problem and possible solutions.
2. Production’s management should increase the overtime that is necessary to meet production standards.
3. Purchasing should change suppliers of new materials.
4. Production should test materials from several suppliers in the quantities needed to determine which supplier can best meet the required materials standards of quality and consistency.

b. What recommendation would you make in this case?

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Condition Criteria Cause Effect Current production rate per machine is 120 units per day, leading to more than two-week delays in job deliveries. The standard production rate is an average of 150 units per day per machine. The variable quality of the current supply of raw materials results in inconsistent product quality, numerous rejects, and machine breakdowns. In addition to production delays, 10 percent of all orders have been cancelled over the last three months. New orders have decreased from an average of 100 per week to 90. The combined effect of cancelled orders and the loss of new sales decreases revenues by approximately $200,000 monthly. Production costs also have increased by $15,000 per month in materials wastage and $5,000 average monthly repair cost on machinery.