Othman, the purchasing agent for a local plant of the BaruLama Electronics Division, was considering the possible purchase of a component from a new supplier. The component's purchase price, RM0.90, compared favorably with the standard price of RM1.10. Given the quantity that would be purchased, Othman knew that the favorable price variance would help to offset an unfavorable variance for another component. By offsetting the unfavorable variance, his overall performance report would be impressive and good enough to help him qualify for the annual bonus. More importantly, a good performance rating this year would help him to secure a position at division headquarters at a significant salary increase. Purchase of the part, however, presented Othman with a dilemma. Consistent with his past behavior, Othman made inquiries regarding the reliability of the new supplier and the past's quality. reports were basically negative. the supplier had a reputation for making the first two or three deliveries on schedule but being unreliable from then on. Worse, the part itself was of questionable quality. The number of defective units was only slightly higher than that for other supplier, but the life of the component was 25% less than what normal sources provided.