Freeman10e SM Ch11v2
CHAPTER 11
Internal Service Funds
ANSWERS TO QUESTIONS
Question 11-1
Among the advantages to the unit establishing such an Internal Service Fund are the following:
1. Centralized purchasing. Centralized purchasing might permit a more qualified purchasing agent to be employed; lead to the acquisition of better goods for the same price or goods of equal quality to those now being acquired at a lower price; result in better control of quantities ordered; increase both the quantity discounts received and the purchase discounts taken by buying in larger units and in planned order sizes and by improving purchase discount control; reduce the number of purchase orders that have to be processed; etc.
2. Central storeroom. A central storeroom might lead to better assessment of purchasing needs; less obsolete inventory; less total investment in inventory, through avoiding duplication of inventory items in several departments; better control over theft and other causes of inventory shrinkage; improved inventory costing, both within the Internal Service Fund and with regard to amounts charged to the various departments; fewer out-of-stock delays; etc.
Question 11-2
Many benefits should accrue as a result of costing the activities financed through an Internal Service Fund, including:
1. The knowledge of what a good or service costs is provided, as well as the ability to compare the cost of the goods or services provided through the Internal Service (IS) Fund with that of similar goods or services provided commercially. In this sense it serves both to enhance general knowledge and as a control over the IS activity to ensure that it does not price its goods or services above the market price of similar ones.
2. Related to the first, it should facilitate more intelligent "make or buy" decisions at all levels.
3. It helps create a "cost conscious" attitude among employees at all levels and thereby encourages economy and efficiency of governmental management.
4. The
Internal Service Funds
ANSWERS TO QUESTIONS
Question 11-1
Among the advantages to the unit establishing such an Internal Service Fund are the following:
1. Centralized purchasing. Centralized purchasing might permit a more qualified purchasing agent to be employed; lead to the acquisition of better goods for the same price or goods of equal quality to those now being acquired at a lower price; result in better control of quantities ordered; increase both the quantity discounts received and the purchase discounts taken by buying in larger units and in planned order sizes and by improving purchase discount control; reduce the number of purchase orders that have to be processed; etc.
2. Central storeroom. A central storeroom might lead to better assessment of purchasing needs; less obsolete inventory; less total investment in inventory, through avoiding duplication of inventory items in several departments; better control over theft and other causes of inventory shrinkage; improved inventory costing, both within the Internal Service Fund and with regard to amounts charged to the various departments; fewer out-of-stock delays; etc.
Question 11-2
Many benefits should accrue as a result of costing the activities financed through an Internal Service Fund, including:
1. The knowledge of what a good or service costs is provided, as well as the ability to compare the cost of the goods or services provided through the Internal Service (IS) Fund with that of similar goods or services provided commercially. In this sense it serves both to enhance general knowledge and as a control over the IS activity to ensure that it does not price its goods or services above the market price of similar ones.
2. Related to the first, it should facilitate more intelligent "make or buy" decisions at all levels.
3. It helps create a "cost conscious" attitude among employees at all levels and thereby encourages economy and efficiency of governmental management.
4. The