BUS/230 Week 8 Quiz – Strayer
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53. Identical prices received from various sources should:
1. be expected when the specification is highly customized.
2. always make the buyer suspicious of collusion.
3. only draw attention if the buyer is dissatisfied with the price quoted.
4. draw attention if the specification is complex or detailed.
5. result in the buyer taking legal action against all bidders.
54. Most direct costs are:
1. variable costs.
2. overhead costs.
3. general and administrative costs.
4. semivariable costs.
5. fixed costs.
55. If the buyer wants to motivate the seller to manage total costs, the best type of contract is:
a. firm-fixed-price (FFP).
b. cost-plus-incentive-fee (CPIF)
c. firm-fixed-price plus incentive fee (FFPIF).
d. cost-plus-fixed-fee (CPFF).
e. cost-no-fee (CNF).
56. The market approach to pricing:
1. means prices are set to cover direct costs, contribute to indirect, and attain a profit.
2. is the only defensible pricing mechanism for ethical companies to use.
3. implies that prices are set based on what the market will bear.
4. means that prices are adjusted regularly to ensure that the selling organization recoups all its market costs.
5. implies that market analysis is the only technique that should be employed to negotiate prices.
57. The prime function of an organized commodity exchange is to furnish an established marketplace where:
a. the forces of supply and demand operate freely.
b. commodity prices can be controlled.
c. sellers of the same commodity can come together to set prices.
d. products that are difficult to grade can be traded.
e. there are only a limited number of buyers and sellers.
58. Forward buying:
1. offsets transactions to protect against price and exchange risks
2. involves no risk for the buying organization.
3. involves purchasing for known or estimated near-term requirements.
4. is the same as speculation.
5. seeks to take advantage of price movements.
59. Items for which prices are comparatively low, and the cost of price reduction efforts may exceed any price savings realized, are called:
1. sensitive commodities.
2. raw materials.
3. special items.
4. standard production items.
5. MRO items.
60. A fair price:
a. is based on market conditions, and cost structure has no bearing on the determination of a fair price.
b. is the lowest price that ensures a continuous supply of the proper quality where and when needed and at which the supplier makes a reasonable profit.
c. is based on the cost to produce an item or service without consideration for the supplier’s profit margin.
d. is an amount arrived at through negotiations where the seller’s price is a starting point..
e. is when all sellers of equal goods or services receive the same per unit price.
61. A cash discount allows:
a. the seller to secure prompt payment, but has no benefits for the buyer.
b. the buyer to pay a lower price per unit, but has no benefits for the seller.
c. the seller to secure prompt payment, and the buyer to pay a lower price per unit.
d. the seller to demand payment in cash on demand (C.O.D.) upon receipt of goods.
1. the buyer to always calculate the discount based on the delivery date.
62. In the event the bidder does not make proper payment to its suppliers, the bond that protects the buyer against liens that might be granted to these suppliers, is called a:
a. performance bond.
b. surety bond.
c. bid bond
d. payment bond.
e. lien bond.
True and False
1. A cash discount of 2/10, N/30 (2 percent cash discount if payment is made in 10 days, with the gross amount due in 30 days) is the equivalent of approximately a 36 percent interest rate.
2. Governments play a role in establishing prices by establishing production and import quotas and by regulating the ways that buyers and sellers are allowed to behave in agreeing on prices.
3. To be fair, the basis and terms of cancellation should be agreed on in advance and made part of the terms and conditions of the purchase order.
4. Competitive bidding, in general, is the least efficient means of obtaining a fair price for items bought.
5. Online reverse auctions are useful means of price determination for special items.
6. For goods bought on a non-recurring basis, the contract may provide for a reduction in price should the buyer ever again purchase the item.
7. Canceling a contract for a technicality when market prices are falling is considered a perfectly acceptable and ethical practice.
8. An escalator clause provides for an increase, as well as a decrease, in price if costs change.
9. One justification for a quantity discount is that the buyer should not pay more than the actual cost of packing, crating, and transportation.
10. The Robinson-Patman and Sherman Antitrust Acts are primarily designed to prevent the stronger party from imposing too onerous conditions on the weaker one and preventing collusion so that competition will be maintained. .
63. Target pricing:
a. starts with the supplier’s price, and works to determine the selling price of the buying organization’s end product or service.
b. starts with the selling price of an organization’s end product minus the operating profit to establish the target cost.
c. starts with the selling price of an organization’s end product minus actual manufacturing, overhead, and materials costs to determine operating profit.
d. starts with the supplier’s price, and works to determine the supplier’s true cost structure.
e. starts with the buyer’s lowest reasonable price target, and works to a negotiated price agreed on by the buyer and the supplier.
64. Activity based costing attempts to:
a. correct the distortions built into product costing by the way that direct costs are allocated.
b. correct the distortions built into product costing by the way that the learning curve is applied to direct labor costs.
c. turn indirect costs into direct costs by tracking the cost drivers behind indirect costs.
d. turn direct costs into indirect costs by tracking the cost drivers behind direct costs.
e. introduce a new way to allocate direct costs that more accurately captures labor and material usage.
65. An externally focused process of analyzing costs in terms of the overall value chain is called:
a. strategic cost management.
b. supply chain management.
c. total cost management.
d. profit leverage effect.
e. activity based costing.
66. Target pricing may result in companywide cost reductions in:
i. design to cost.
ii. manufacture to cost.
iii. purchase to cost.
iv. a and b.
v. a, b, and c.
67. Sources of sustainable competitive advantage include:
a. product differentiation (where customers have low price sensitivity),
b. low cost (where customers have high price sensitivity),
c. a combination of product differentiation and cost-leadership.
d. a, b and c
i. none of the above
68. When developing a negotiation strategy, the negotiator should assess the positions of strength of both (all) parties to:
a. decide if negotiation makes sense.
b. establish negotiation points.
c. avoid setting unrealistic expectations.
d. b and c.
e. a, b, and c.
69. In portfolio analysis, the goal when purchasing strategic goods or services is to:
a. assure quality at expected levels.
b. assure continuous supply at lowest cost of ownership.
c. minimize acquisition time and cost.
d. minimize acquisition time and cost and price per unit.
e. reduce or eliminate customization.
70. In portfolio analysis, the goal when purchasing leverage items is:
a. minimize total cost of ownership.
b. minimize acquisition time and cost and price per unit..
c. reduce or eliminate customization.
d. assure continuous supply at lowest total cost of ownership.
e. assure quality at expected levels.
71. Although associated with a number of factors, the learning curve normally is most closely identified with the analysis of:
i. tooling costs.
ii. profit rates.
iii. overhead costs.
iv. direct labor costs.
v. direct material costs.
72. When estimating the costs of a manufacturing supplier:
a. prices of raw materials are not commonly accessible.
b. equipment depreciation is typically the largest single cost element in overhead.
c. material costs are difficult to estimate.
d. direct labor costs are the easiest costs to estimate.
e. labor rates are typically uniform across different plant locations.
True and False
10. Besides price determination, there are very few areas in supply management where negotiation is a useful and cost-effective tool.
11. Activity based costing primarily is an accounting process that has little practical value for buyers.
12. Value engineering (VE) and value analysis (VA) refer to the same process, but VE is applied to the design stage, and VA is applied to redesign.
13. When cost analysis is applied to a supplier’s price, the buyer focuses on identifying an overall cost reduction target with little insight into specific cost elements.
14. If the goal of negotiation is performance, then the process and tactics used during the negotiation are important because they have great impact on the intention to perform.
15. Educating suppliers about the buying organization’s operations is an example of a transaction cost in the total cost of ownership model.
16. In negotiation, a fact is any piece of information on which the buyer believes he or she can negotiate an agreement with the supplier.
17. Value methodology is a systematic approach to analyzing the functions of a product, part, service, or process to satisfy all needed quality and user requirements at optimum total cost of ownership.
18. A unique cost model is one that applies to a variety of common supply situations.
19. In planning for negotiation, a factor or item of information over which disagreement is expected is known as an issue.