METHOD OF PURCHASING

Ordering needed food and supplies from the list of vendors based on daily, weekly, or monthly price quotations.

FORMAL PURCHASING

COST PLUS PRICING

Definition-Cost plus pricing involves adding a markup to the cost of goods and services to arrive at a selling price. Under this approach, you add together the direct material cost, direct labor cost, and overhead costs for a product, and add to it a markup percentage in order to derive the price of the product.

INFORMAL PURCHASING

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Positive - Assured contract profits. Justifiable. Simple Negative - Ignore cost change, Ignores Competition

The formal process of buying goods and services.

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  • Prices are based on a set specification furnished to interested vendors
  • The buyer may request daily prices for fresh fruits and vegetables but may use a monthly quotation list for grocery items.
  • The order is placed after consideration of price in relation to quality, delivery,and other services offered.
    Contact between the buyer and vendor is made by fax, computer, telephone, or through sales representatives who call on the buyer

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1) Standard - a one time buy

2) planned - an agreement on a
specific item at an approximate date

3) blanket - an agreement on specific terms and conditions: date and quantity and amount are not specified.

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Usually based on informal agreements that often involve oral negotiations. the transactions are usually completed on the phone.

Reffered as " bid-buying" or "competitive buying"

Purchase order - can be of various of types :

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Most of the procedures involved in this type of buying are formal, so it must conducted in writing.

Applicable to large operations and when large quantities of products are purchased.

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Records of all transactions have to be maintained, since any claims or legal actions have to be supported by documents.

1)Competitive bid

2)Negotiated buying

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3)Standing order

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