Question

Asri, the purchasing agent for Kota Manufacturing Division, was considering the possibility of purchasing a component from a new supplier. The price is RM0.70 which is below the standard price of RM0.90.The favourable price variance would help Asri to produce an impressive performance report and good enough to qualify him for annual bonus. More importantly, a good performance this year would secure him a position at the headquarters with significant salary increase.

However, there was doubt on his part knowing the background of the supplier. Reports were basically negative, indicating that the supplier was known to make two to three deliveries on time but unreliable there on. There was only questions regarding the quality of the parts delivered, with life of the components being 25 percent less than what normal sources would provide.

If the component was purchased, no problems would surface for several months, Asri would already be at the headquarters. Considering the minimum personal risk, Asri continues with the decision to purchase from the new supplier.

Required:

Do you think that the use of standards and practice of holding individual accountable for their achievement played major roles in Asri's decision? Was he being ethical?.

(Total: 5 marks)