Soft Glow, Inc. manufactures light bulbs. Its purchasing policy requires that the purchasing agents place each quarter$$s purchasing requirements out for bid. This is because the Purchasing Department is evaluated solely by its ability to get the lowest purchase prices. The lowest bidder receives the order for the next quarter $(90$ working days$).$

To make its bulb products, Soft Glow requires $45,000$ pounds of glass per quarter. Soft Glow received two glass bids for the third quarter, as follows:

Mid$-$States Glass Company: $$23\mathrm{.}00$ per pound of glass. Delivery schedule: $45,000(500$ lbs$.$ x $90$ days$)$ pounds at the beginning of July to last for $3$ months.

Cleveland Glass Company: $$23\mathrm{.}15$ 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.

$1.$ All of the following are ways in which Soft Glow could develop long$-$term partnerships with its suppliers except:

a$.$ share research and development efforts.

b$.$ ignore internal costs caused by delivery delays while contracting on the best price point basis.

c$.$ share production schedules.

d$.$ establish electronic data interchange.

e$.$ establish supplier raw materials logistical support.

b

$2.$ All of the following statements are true regarding the hidden costs beyond the price of Mid$-$States Glass Company's bid except:

a$.$ They are easy to determine, yet often overlooked.

b$.$ They ignore additional internal costs of the higher inventory imposed by Mid$-$States Glasses' delivery schedule.

c$.$ The hidden costs are incurred by other parts of the organization, not purchasing.

d$.$ The hidden costs include costs for additional space and handling.

e$.$ The hidden costs include costs of obsolescence and financing.

a

$3.$ 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 $8\%?$ Round to the nearest cent.

$fill in the blank $3$

per lb$.$

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$1.$ Focus on the long$-$term strategies of building a long$-$term supply chain strategy with suppliers.

$2.$ Review lean principles in terms of advantages and cost management benefits.

$3.$ Assume that the pounds supply runs out by the end of the quarter. Use the average number of pounds and the price per pound to determine the total inventory investment. Apply the interest rate per quarter to that amount to determine inventory financing cost for the quarter and how that impacts the additional cost per pound. Now consider this in your answer. Is Mid$-$States still the low$-$cost bidder? I am looking for answer #$3$