Management Accounting

Report to Sanjay and Tiana on the Supplier performance of Curry Express

Executive Summary

* Despite having higher supplier cost, MSS has better Supplier performance Index thus making it more economical supplier for Curry Express.

* Curry Express needs to change its suppliers because it is mainly because of their spices CE’s food taste bad and thus they are losing customers.

* They also should strongly think on spending the $10,000 to build the storage space to stock up spices since those spices come from overseas, any delays with their delivery would completely stall CE’s activities. Furthermore this is also the very reason they are unable to fill supermarket orders in time.

* While choosing the new supplier for spices, CE must ensure that the spices are farmed organically and the work standards for the people involved in all different parts of the supply chain are treated fairly. Both these factors impact directly on customer behaviours not only for CE’s customers but for customers for any businesses. If they can ensure both of them they can use it to their advantage in their marketing.

MAIN REPORT

a) Calculate the total cost of ownership (total supplier cost) and supplier performance index for each of the two suppliers (AIW and MSS) over the past year.

Supplier Cost (per year) | | | | | |

| Rate | Cost driver | Total |

Activity (pa) | | AIW | MSS | AIW | MSS |

Ordering | 40 | 24 | 24 | 960 | 960 |

Delivery | 30 | 32 | 24 | 960 | 720 |

Delivery inspection | 50 | 16 | 12 | 800 | 600 |

Return incorrect order | 40 | 10 | 0 | 400 | 0 |

Supplier Payments | 20 | 12 | 12 | 240 | 240 |

Dispute invoice | 40 | 2 | 8 | 80 | 320 |

Supplier Activity Cost (pa) | | | | 3440 | 2840 |

Purchase cost (pa) | | | | 12000 | 14000 |

Total Supplier cost/Total cost of ownership | | | | 15440 | 16840 |

| | | | | |

Supplier ranking (purchase costs and TOC) | | | | 1 | 2 |

Supplier ranking (supplier activity costs) | | | | 2 | 1 |...