Deck 11: Cost Management

Question 1

The learning curve is based on:

A)the difficult to prove premise that more training leads to lower costs.
B)the assumption that labor will never forget how to do something.
C)the common principle that one becomes more proficient with experience.
D)a direct relationship to overhead costs.
E)an indirect relationship to direct material costs.

Answer 1

C

Question 2

Which tool will focus everyone in the organization on cost management:

A)learning curve.
B)negotiation.
C)activity based costing.
D)portfolio analysis.
E)target costing.

Answer 2

E

Question 3

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)establish negotiation points and avoid setting unrealistic expectations.
E)decide if negotiation makes sense,establish negotiation points and avoid setting unrealistic expectations.

Answer 3

E

Question 4

Total cost of ownership (TCO)can be used to:

A)highlight cost reduction opportunities.
B)compare suppliers in a supplier selection decision.
C)prepare for a negotiation.
D)assess the reasonableness of a supplier's prices.
E)highlight cost reduction opportunities,compare suppliers in a supplier selection decision,prepare for a negotiation and assess the reasonableness of a supplier's prices.

Question 5

Activity based costing attempts to correct the distortions built into product costing:

A)by tracking cost drivers of indirect costs and turning indirect costs into direct.
B)by improving the way that direct costs are allocated.
C)by improving the way that the learning curve is applied to direct labor costs.
D)by tracking cost drivers of direct costs and turning direct costs into indirect.
E)by capturing labor and material usage more accurately.

Question 6

The zone of negotiation:

A)is the mindset that one must be in prior to initiating face-to-face negotiations.
B)may be positive or negative depending on the gap between buyer's and seller's objectives.
C)is the range of options the buyer will consider during the negotiation.
D)indicates the feasibility of negotiation and the likelihood of an agreement.
E)is perceived in exactly the same way by buyer and seller in a negotiation.

Question 7

The process of attempting to determine all cost elements such as acquisition price,purchasing administration,follow-up,expediting,inspection and testing,rework,scrap,downtime,lost sales and customer returns is called:

A)activity-based costing.
B)total cost of ownership.
C)target costing.
D)competitive bidding.
E)learning curve.

Question 8

In portfolio analysis,the goal when purchasing leverage items is to:

A)assure supply.
B)assure continuous supply at lowest total cost of ownership.
C)minimize acquisition time and cost,and price per unit.
D)assure quality at expected levels.
E)reduce or eliminate customization.

Question 9

When a supplier offers a lower price for a larger quantity,the buyer should:

A)determine the return on investment.
B)order according to the EOQ model.
C)always take the quantity discount.
D)never take the quantity discount.
E)determine the preference of senior management.

Question 10

In portfolio analysis,the goal when purchasing noncritical or routine spend is to:

A)assure quality at expected levels.
B)minimize price per unit.
C)minimize acquisition time and cost.
D)reduce or eliminate customization.
E)assure continuous supply at lowest total cost of ownership.