Deck 10: Price

Question 1

The lowest price that ensures a continuous supply of the proper quality where and when needed and allows the supplier to make a reasonable profit,is commonly known as:

A)a fair price.
B)a market price.
C)a cost-based price.
D)a buyer's market price.
E)a seller's market price.

Answer 1

A

Question 2

The lowest bid may not receive the order if:

A)the buyer discovers the lowest bidder is unreliable.
B)the lowest bid is higher than the buyer believes justifiable.
C)there is reason to believe the bidders colluded.
D)the lowest bid is higher than the buyer believes justifiable and there is reason to believe the bidders colluded.
E)the buyer discovers the lowest bidder is unreliable,the lowest bid is higher than the buyer believes justifiable and there is reason to believe the bidders colluded.

Answer 2

E

Question 3

Labor and material costs are typically:

A)semivariable costs.
B)fixed costs.
C)indirect costs.
D)direct costs.
E)semivariable costs and fixed costs.

Answer 3

D

Question 4

The cost approach to pricing:

A)is the only defensible pricing mechanism for ethical companies to use.
B)implies that prices are set based on the cost the market will bear.
C)means prices are adjusted to ensure the selling organization recoups all costs.
D)implies that cost analysis is the only technique to be used to negotiate prices.
E)means prices are set to cover direct costs,contribute to indirect costs,and provide a profit.

Question 5

The fairest possible means of treating all suppliers alike in a competitive bidding situation is to:

A)establish a policy of firm bidding.
B)allow all bidders to change their bids prior to the bid opening.
C)allow for negotiation after all bids are received.
D)give prospective suppliers target cost.
E)none of the above because competitive bidding is not fair.

Question 6

Fixed costs generally remain the same regardless of the number of units produced.

Question 7

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.
E)the buyer to always calculate the discount based on the delivery date.

Question 8

This bond guarantees work will be done according to specifications,in the time specified,and if another supplier does rework or completes the order,purchasing is indemnified for these extra costs.

A)bid bond.
B)performance bond.
C)lien bond.
D)payment bond.
E)surety bond.

Question 9

If identical bids are received,the buyer might choose to:

A)reject all bids.
B)initiate an investigation.
C)negotiate with one or more suppliers.
D)reject all bids and initiate an investigation.
E)reject all bids and negotiate with one or more suppliers.

Question 10

Items for which prices are comparatively low and the cost of price reduction efforts may exceed any price savings realized are:

A)parts,components,and packaging.
B)raw materials.
C)maintenance,repair,and operating supplies.
D)services.
E)capital assets.

Question 11

When using competitive bidding to determine prices,the purchaser should ensure that the bidders are:

A)qualified to make the item or service in accordance with the buyer's specifications and able deliver it by the desired date.
B)sufficiently reliable.
C)numerous enough to ensure a truly competitive price.
D)qualified to make the item or service in accordance with the buyer's specifications,able deliver it by the desired date and sufficiently reliable.
E)qualified to make the item or service in accordance with the buyer's specifications,able deliver it by the desired date,sufficiently reliable and numerous enough to ensure a truly competitive price.

Question 12

A prime function of an organized commodity exchange is to furnish an established marketplace where:

A)commodity prices can be controlled.
B)sellers of the same commodity can come together to set prices.
C)products that are difficult to grade can be traded.
D)there are only a limited number of buyers and sellers.
E)the forces of supply and demand operate freely.

Question 13

An escalator clause provides for an increase,but not a decrease,in price if costs change.

Question 14

Costs incurred in the operation of a production plant or process,but normally cannot be related directly to any given unit of production or service provided,are called:

A)direct costs.
B)variable costs.
C)semivariable costs.
D)indirect costs.
E)fixed costs.

Question 15

A cash discount of 1/15,N/30 (1 percent cash discount if payment is made in 15 days,with the gross amount due in 30 days)is the equivalent of what approximate interest rate?

A)24 percent.
B)30 percent.
C)36 percent.
D)45 percent.
E)54 percent.

Question 16

If the delivery date is some months or years away and if there is substantial chance of price escalation,a supplier may feel that there is far too much risk of loss to agree to sell under a:

A)firm-fixed-price plus incentive fee (FFPIF).
B)firm-fixed-price (FFP).
C)cost-no-fee (CNF).
D)cost-plus-fixed-fee (CPFF).
E)cost-plus-incentive-fee (CPIF).

Question 17

The purchasing manager indexes (PMIs)are leading economic indicators derived from monthly surveys of purchasing managers about forecasted company conditions.

Question 18

Information regarding price trends cannot be easily obtained because most organizations are reluctant to share cost and price information.

Question 19

Hedging is a way to:

A)ensure lowest price.
B)try to minimize price and currency exchange risks.
C)minimize collusive bidding.
D)set trade discounts.
E)evaluate quantity discounts.

Question 20

Indirect costs can be specifically and accurately assigned to a given unit of production or a specific identifiable task performed by a service provider.

Question 21

Governments typically play no role in establishing prices or regulating how buyers and sellers are allowed to behave in agreeing on prices.

Question 22

Accepting a price discount for ordering larger quantities leads to lower levels of anticipation inventory.

Question 23

Prices may not be directly related to costs in the market approach.

Question 24

An exception to firm bidding allows the buyer and bidders the flexibility to clarify and define specifications and prices after the initial bids are received,and then bidders submit best-and-final-offers (BAFOs).

Question 25

A payment bond protects the buyer against liens that might be granted to suppliers of material and labor to the bidder,in the event the bidder does not make proper payment to its suppliers.

Question 26

Canceling a contract for a technicality when market prices are falling is considered an acceptable and ethical practice.

Question 27

The process for bidding in the public sector is generally similar to the private sector,although there are a few important differences.

Question 28

Farmers turn to marketing and production contracts when they perceive the efficacy of spot markets to be inadequate in handling their risks,and processors turn to contracts as a way to encourage farmers to produce specific products at desired times.

Question 29

Competitive bidding,in general,is the most efficient means of obtaining a fair price for items bought.

Question 30

Online reverse auctions are useful means of price determination for customized items.