In recent years, the significance of Purchasing has increased at a rate greater than in almost all other business functions. Central Purchasing departments, where they exist, have only existed in large corporations. This change of thinking within businesses has not been a matter of chance. On the contrary, changing conditions have made purchasing the focus of business transactions. Increased global competition, ever shorter product life cycles, and steadily increasing pricing pressures are only some of the factors involved. Companies wishing to perform successfully in the market are forced to think outside the box by organizing not only their internal but also their external supply chains as efficiently and economically as possible. In this context, Purchasing is given a totally new range of tasks.

	Base Values in GH	Turnover +5%	Labour costs -5%	Material costs -5%
Turnover	100,000	105,000	100,000	100,000
Material costs	50,000	52,500	50,000	47,500
Labour Costs	25,000	26,250	23,750	25,000
Other Costs	20,000	21,000	20,000	20,000
Profit	5,000	5,250	6,250	7,500
Change in Profit		+5%	+25%	+50%

Requirements Using the financial statement of a listed manufacturing company on the Ghana Stock Exchange for the year ending 2019:

a) Determine the change in Gross profit if raw material cost increases by 5% (AP: 7 MARKS)

b) Determine the change in Gross profit if raw material cost reduces by 5% (AP: 8 MARKS)

c) Based on your answers in question (a) and (b) above, comment on the significance of Centralized Procurement Departments for organisations (AP: 10 MARKS)

NOTE: Use the financial statement figures as the base values in each case