Deck 13: Total Cost of Ownership

Question 1

Accurate estimation of total costs requires a cross-functional approach.Supply management is a critical member of such a cross-functional approach.

Answer 1

True

Question 2

Which of the following is not one of the three major components of total cost of ownership presented in the textbook?

A) Acquisition Costs
B) Ownerships Costs
C) Post-Ownership Costs
D) Opportunity Costs

Answer 2

D

Question 3

TCO analysis of equipment purchases usually does little to help reduce the expenditures for maintenance and parts over the lives of the investments.

Answer 3

False

Question 4

TCO analysis of the labor base can reap lower per person costs,greater benefits,and improved morale.

Question 5

Total cost of ownership (TCO)is a simply a mathematical formulation and is best not described as a philosophy.

Question 6

TCO analysis should not be used on recurring material costs.

Question 7

TCO analysis of equipment purchases may help reduce the expenditures for maintenance and parts over the lives of the investments.

Question 8

Activity-based costing (ABC)is a technique for directly assigning costs consumed by the object.

Question 9

Total cost of ownership (TCO)is a philosophy for understanding all supply chain related costs of doing business with a particular supplier for a particular good or service.

Question 10

TCO is also applicable in one's private life enabling better decision-making.

Question 11

TCO is not applicable in one's private life to enable better decision-making.

Question 12

TCO analysis of recurring material costs are often overlooked and can yield great savings.

Question 13

An easy problem to resolve in TCO analysis of manufacturers is the accurate allocation of manufacturing overhead to products being purchased.

Question 14

TCO is an analytical tool,but not a philosophy.

Question 15

Supply managers must shift their focus in procuring materials,services and equipment from price to total cost.

Question 16

Supply managers must shift their focus in procuring materials,services and equipment from total cost to price.

Question 17

A major problem in TCO analysis of manufacturers is accurate allocation of manufacturing overhead.

Question 18

TCO is an analytical tool and a philosophy.

Question 19

Activity-based costing (ABC)is a technique for accumulating cost for a given cost object that represents the total and true economic resources required or consumed by the object.

Question 20

Accurate estimation of total costs does not require a cross-functional approach.It only requires that supply management carefully perform extensive time and motion studies to estimate accurate costs.

Question 21

Which of the following is not a supply chain cost based on the TCO?

A) Forecasting
B) Administration
C) Transportation
D) Inventory
E) Environmental

Question 22

Which of the following is not an ownership cost?

A) Downtime Costs
B) Planning Costs
C) Risk Costs
D) Cycle Time Costs
E) Conversion Costs

Question 23

Which of the following is not an acquisition cost?

A) Purchase Price
B) Planning Costs
C) Taxes
D) Risk costs
E) Financing Costs

Question 24

TCO analysis may include the study of all but one of the following issues.Which issue does not belong in the TCO analysis?

A) Volatility of end-customer demand
B) Financial accounting reports
C) Inventory carrying costs
D) Inventory risk
E) Quality costs

Question 25

Which of the following is not an ownership cost?

A) Financing Costs
B) Downtime Costs
C) Risk Costs
D) Non-Value Added Costs
E) Supply Chain Costs

Question 26

TCO analysis may include the study of all but one of the following issues.Which issue does not belong in the TCO analysis?

A) Structure of foreign and domestic tariffs/duties/taxes
B) Foreign political/economic stability
C) Foreign exchange risk
D) Foreign language syntax
E) Language/communication requirements

Question 27

Which of the following is not a post-ownership cost?

A) Environmental Costs
B) Warranty Costs
C) Inventory
D) Product Liability Costs
E) Customer Dissatisfaction Costs

Question 28

Which of the following is not a supply chain cost based on the TCO?

A) Manufacturing
B) Warranty
C) Customer service
D) Supplier selection/relationships
E) Global sourcing

Question 29

TCO analysis may include the study of all but one of the following issues.Which issue does not belong in the TCO analysis?

A) Manufacturability
B) Projected sales
C) Infrastructure
D) Outsource decision
E) Analysis of suppliers beyond tier one

Question 30

Which of the following is not true of a NPV calculation and analysis?

A) NPV analyzes present values of the initial expenditure along with the likely future revenue and expenditure streams
B) NPV is too difficult to include in most TCO analyses
C) NPV greater than zero suggests accepting the investment
D) NPV less than 0 suggests rejecting the investment
E) NPV = 0 is the point of indifference