Deck 14: Cost Approaches and Techniques

Question 1

Which of the following best explains 'target-return pricing'? 

A) Price is based on expected demand for the product. 
B) Price is based on the amount of profit that should be realized. 
C) Price is based on the importance of the customer to the supplier. 
D) Price is based on expected supply of the product.

Answer 1

  B

Question 2

Which of the following is not an internal factor influencing the purchase price? 

A) Socio-political. 
B) Logistics. 
C) Technical. 
D) Organizational.

Answer 2

  A

Question 3

Which of the following best explains external factors? 

A) Those factors about which the supplier can exert control. 
B) Those factors about which the purchaser cannot exert control. 
C) Those factors about which the purchaser can exert control. 
D) Those factors about which the supplier cannot exert control.

Answer 3

  D

Question 4

Which of the following best explains 'perceived value pricing'? 

A) Price is based on what the market can bear. 
B) Price is based on the amount of profit that should be realized. 
C) Price is based on the importance of the customer to the supplier. 
D) Price is based on expected supply of the product.

Question 5

Which of the following best explains 'value pricing'? 

A) Price is based on what the market can bear. 
B) Price is based on the amount of profit that should be realized. 
C) Price is based on the importance of the customer to the supplier. 
D) Fairly low prices for high quality offerings.

Question 6

Which of the following best explains 'going rate pricing'? 

A) Price is based on competitor prices. 
B) Price is based on the amount of profit that should be realized. 
C) Price is based on the importance of the customer to the supplier. 
D) Fairly low prices for high quality offerings.

Question 7

Which of the following is not an internal factor influencing the purchase price? 

A) Technological. 
B) Logistics. 
C) Technical. 
D) Organizational.

Question 8

Which of the following is not an example of market circumstances? 

A) Demand. 
B) Supply. 
C) Political factors. 
D) Cost price.

Question 9

Which of the following is not a factor influencing the fixing of the selling price? 

A) Expected demand for the product. 
B) The expected development of the cost price per product unit. 
C) The importance of the customer to the supplier. 
D) Exchange rates.

Question 10

Which of the following best explains cost-based pricing? 

A) A particular profit margin is added to some costs, including the cost of sales. 
B) A particular profit margin is added to all costs, including the cost of sales. 
C) A particular profit margin is added to the cost of sales. 
D) A 5% profit margin is added to the cost of sales.

Question 11

Which of the following best explains 'the supplier's specification'? 

A) The buyer knows precisely the cost of the material to be purchased. 
B) The seller knows precisely the cost of the material to be purchased. 
C) The buyer can only obtain a rough indication of the product's cost by means of demand market research. 
D) The buyer can only obtain a rough indication of the product's cost by means of supply market research.

Question 12

Which of the following best explains mark-up pricing? 

A) A particular profit margin is added to some costs, including the cost of sales. 
B) A particular profit margin is added to all costs, including the cost of sales. 
C) A fixed percentage mark-up is added to the cost price. 
D) A 5% profit margin is added to the cost of sales.

Question 13

Which of the following best explains market-based pricing? 

A) A particular profit margin is added to some costs, including the cost of sales. 
B) The price of the product is determined by the market and is generated exclusively by market circumstances. 
C) A fixed percentage mark-up is added to the cost price. 
D) A 5% profit margin is added to the cost of sales.

Question 14

Which of the following is not an external factor influencing the purchase price? 

A) Economic. 
B) Socio-political. 
C) Technological. 
D) Technical.

Question 15

Which of the following best explains 'the customer's specification'? 

A) The buyer knows precisely the cost of the material to be purchased. 
B) The buyer can only obtain a rough indication of the product's cost by means of supply market research. 
C) The buyer can only obtain a rough indication of the product's cost by means of demand market research. 
D) The buyer knows precisely the profit margin on the material to be purchased.

Question 16

Which of the following is not a factor influencing the fixing of the selling price? 

A) Expected demand. 
B) Number of competitors in the market. 
C) The customer's order volume. 
D) Exchange rates.

Question 17

Which of the following is not an external factor influencing the purchase price? 

A) Economic. 
B) Socio-political. 
C) Technological. 
D) Organizational.

Question 18

Which of the following best explains internal factors? 

A) Those factors about which the supplier can exert control. 
B) Those factors about which the purchaser cannot exert control. 
C) Those factors about which the purchaser can exert control. 
D) Those factors about which the supplier cannot exert control.

Question 19

Which of the following is not an internal factor influencing the purchase price? 

A) Economic. 
B) Logistics. 
C) Technical. 
D) Organizational.

Question 20

Which of the following is not an external factor influencing the purchase price? 

A) Economic. 
B) Socio-political. 
C) Technological. 
D) Logistics.

Question 21

Which of the following is not element exposed by cost modelling? 

A) Warranty costs. 
B) The cost of use. 
C) Actual acquisition costs that the company incurs in buying the materials. 
D) Materials purchase prices.

Question 22

Which of the following is not a financial indicator for assessing a supplier's financial position in relation to cash management? 

A) Cash flow/investments. 
B) Inventory turnover ratio. 
C) Inventory/sales ratio. 
D) Turnover ratio of net capital employed.

Question 23

Which of the following is not a supplier assessment level? 

A) Distribution level. 
B) Product level. 
C) Process level. 
D) Quality assurance system level.

Question 24

Which of the following best explains 'geographical discount'? 

A) Discount is based on volume ordered and buyers can realize a lower price per unit. 
B) Discount is based on orders placed out of season for delivery later in the year. 
C) Discount is based on the how fast the customer pays their bills. 
D) Discount is based on customers 'proximity to the supplier's factory or distribution centre.

Question 25

Which of the following is not a supplier segment? 

A) Strategic partners. 
B) Wholesale partners. 
C) Performance partners. 
D) Preferred suppliers.

Question 26

Which of the following is not a supplier assessment method? 

A) Spreadsheets. 
B) Qualitative assessments. 
C) Vendor ratings. 
D) Purchaser audits.

Question 27

Which of the following is not a factor in the 'learning effect'? 

A) Increased sales. 
B) Reduced defects and line reject rates during the production process. 
C) Increased profits from improved efficiency through streamlining the production process. 
D) Reduced supervision as experience with production of a particular product grows.

Question 28

Which of the following best explains 'price elasticity'? 

A) Discount is based on a special offer to temporarily stimulate sales. 
B) Discount is based on orders placed out of season for delivery later in the year. 
C) Discount is based on the how fast the customer pays their bills. 
D) The extent to which price per unit changes with the volume that is purchased.

Question 29

Which of the following is not a supplier assessment level? 

A) Company level. 
B) Product level. 
C) Process level. 
D) Accreditation level.

Question 30

Which of the following is not a financial indicator for assessing a supplier's financial position in relation to equity/debt relationship? 

A) Cash flow/investments. 
B) Long term debt/fixed assets. 
C) Equity/total assets. 
D) Earning before tax.

Question 31

Which of the following best explains 'seasonal discount'? 

A) Discount is based on volume ordered and buyers can realize a lower price per unit. 
B) Discount is based on orders placed out of season for delivery later in the year. 
C) Discount is based on the how fast the customer pays their bills. 
D) Discount is based on customers 'proximity to the supplier's factory or distribution centre.

Question 32

Which of the following best explains 'payment discount'? 

A) Discount is based on volume ordered and buyers can realize a lower price per unit. 
B) Discount is based on orders placed out of season for delivery later in the year. 
C) Discount is based on the how fast the customer pays their bills. 
D) Discount is based on customers 'proximity to the supplier's factory or distribution centre.

Question 33

Which of the following is not a situation in which to use the 'learning effect'? 

A) When large amounts of money are involved. 
B) When there is insufficient time. 
C) When it concerns customized components manufactured by a supplier to the customer's specification. 
D) When direct labour costs make up an important part of the cost price of the product to be produced.

Question 34

Which of the following is not a supplier segment? 

A) Strategic partners. 
B) Competitive suppliers. 
C) Performance partners. 
D) Customers.

Question 35

Which of the following is not a factor in the 'learning effect'? 

A) Improved process control. 
B) Reduced defects and line reject rates during the production process. 
C) Reduced engineering changes. 
D) Improved turnover.

Question 36

Which of the following is not a supplier assessment method? 

A) Supplier audits. 
B) Qualitative assessments. 
C) Vendor ratings. 
D) Purchaser audits.

Question 37

Which of the following is not a cost driver? 

A) Design. 
B) Facility. 
C) Acquisitions costs. 
D) Operations.

Question 38

Which of the following best explains 'quantity discount'? 

A) Discount is based on volume ordered and buyers can realize a lower price per unit. 
B) Discount is based on orders placed out of season for delivery later in the year. 
C) Discount is based on the how fast the customer pays their bills. 
D) Discount is based on customers 'proximity to the supplier's factory or distribution centre.

Question 39

Which of the following is not a supplier assessment method? 

A) Purchaser audits. 
B) Qualitative assessments. 
C) Vendor ratings. 
D) Cost modelling.

Question 40

Which of the following best explains 'promotional discount'? 

A) Discount is based on a special offer to temporarily stimulate sales. 
B) Discount is based on orders placed out of season for delivery later in the year. 
C) Discount is based on the how fast the customer pays their bills. 
D) Discount is based on customers 'proximity to the supplier's factory or distribution centre.

Question 41

Which of the following best explains 'supplier satisfaction survey'? 

A) Periodically, the buyer invites suppliers through interviews to suggest ideas which may improve business relationships. 
B) Periodically, the buyer invites other suppliers through a standardized survey to suggest ideas which may improve business relationships. 
C) Periodically, the buyer invites other buyers through a standardized survey to suggest ideas which may improve business relationships. 
D) Periodically, the buyer invites suppliers through a standardized survey to suggest ideas which may improve business relationships.

Question 42

Which of the following is not an activity associated with developing suppliers' technical capabilities? 

A) Develop a common lexicon. 
B) Hone core suppliers' innovation capabilities. 
C) Build suppliers' problem-solving skills. 
D) Get senior managers involved in solving problems.

Question 43

Which of the following is not an example of a facility cost driver? 

A) Facility scale. 
B) Degree of vertical integration. 
C) Use of automation. 
D) Transportation costs to customer.

Question 44

Which of the following best explains 'supplier suggestion programme'? 

A) The buyer actively solicits ideas for improvement from suppliers. 
B) The buyer actively solicits ideas for improvement from customers. 
C) The buyer actively solicits ideas for improvement from competitors. 
D) The buyer actively solicits ideas for improvement from employees.

Question 45

Which of the following is not an activity associated with supervising suppliers? 

A) Send monthly report cards to core suppliers. 
B) Provide immediate and constant feedback. 
C) Create compatible production philosophies and systems. 
D) Get senior managers involved in solving problems.

Question 46

Which of the following is not an activity associated with conducting joint improvement activities with suppliers? 

A) Exchange best practices with suppliers. 
B) Initiate kaizen projects at suppliers' facilities. 
C) Set up supplier study groups. 
D) Get senior managers involved in solving problems.

Question 47

Which of the following is not an activity associated with understanding how your suppliers work? 

A) Exchange best practices with suppliers. 
B) Go to see how suppliers work. 
C) Respect suppliers' capabilities. 
D) Commit to co-prosperity.

Question 48

Which of the following is not an example of a facility cost driver? 

A) Location-related wage rate difference. 
B) Degree of vertical integration. 
C) Use of automation. 
D) Facility scale.

Question 49

Which of the following is not an action to take supplier performance to a higher level? 

A) Supplier suggestion programme. 
B) Supplier social event. 
C) Supplier development. 
D) Supplier satisfaction survey.

Question 50

Which of the following best explains 'customer of choice'? 

A) Suppliers are prepared to invest in the relationship resulting in better product and service allowing the customer company to make a difference in its end-user and customer markets. 
B) Suppliers are prepared to invest in the relationship resulting in better product and service. 
C) Suppliers are prepared to invest in the relationship resulting in better product and service allowing the customer company to save money 
D) Purchasers are prepared to invest in the relationship resulting in better product and service allowing the customer company to make a difference in its end-user and customer markets.

Question 51

Which of the following is not an activity associated with understanding how your suppliers work? 

A) Learn about suppliers. 
B) Go to see how suppliers work. 
C) Respect suppliers' capabilities. 
D) Send monthly report cards to core suppliers.

Question 52

Which of the following is not a question that should be asked of suppliers? 

A) How much corporate tax do you pay? 
B) Are you a best-in-class company? 
C) Do you experience learning curve effects in your production or service operational processes? 
D) What are the costs of non-quality for this particular product?

Question 53

Which of the following is not an activity associated with sharing information intensively but selectively with suppliers? 

A) Develop a common lexicon. 
B) Hone core suppliers' innovation capabilities. 
C) Build suppliers' problem-solving skills. 
D) Get senior managers involved in solving problems.

Question 54

Which of the following is not a question that should be asked of suppliers? 

A) Are you a best-in-class company? 
B) What is your ratio of direct to indirect costs? 
C) What is your cost breakdown in terms of overheads, energy, labour and materials? 
D) How much corporate tax do you pay?

Question 55

Which of the following is not an activity associated with turning supplier rivalry into opportunity? 

A) Source each component from two or three vendors. 
B) Go to see how suppliers work. 
C) Create compatible production philosophies and systems. 
D) Set up joint ventures with existing suppliers to transfer knowledge and maintain control.

Question 56

Which of the following is not a cost factor? 

A) Energy costs. 
B) Labour productivity. 
C) Materials costs. 
D) Supplier capacity utilization.

Question 57

Which of the following is not a cost factor? 

A) Labour costs. 
B) Materials costs. 
C) Energy costs. 
D) Supplier capacity utilization.

Question 58

Which of the following is not a contributor to changes in the market structure? 

A) Change in demand. 
B) Change in supply. 
C) Change in supply side inventory. 
D) Change in exchange rates.

Question 59

Which of the following is not a contributor to changes in the market structure? 

A) Change in exchange rates. 
B) Change in supply. 
C) Change in supply side inventory. 
D) Change in supplier capacity utilization.