Question 1

_____ refers to the process of comparing supplier prices against external price benchmarks, without direct knowledge of the supplier's costs.

Accepted Answer

Price analysis involves comparing supplier prices against external price benchmarks, without direct knowledge of the supplier's costs. Cost analysis involves examining a supplier's costs to determine if they are reasonable and necessary. Make-buy analysis involves deciding whether to produce a product in-house or buy it from an external supplier. Target costing involves setting a target cost for a product and then designing it to meet that cost. Total cost analysis involves examining all costs associated with a product or service, including both direct and indirect costs.

Question 2

In the _____, pricing is based on the assumption that long-run profitability depends on the market share obtained by the supplier.

Accepted Answer

The market-share model assumes that the long-run profitability of a supplier depends on the market share obtained. Therefore, pricing decisions are made with the objective of increasing or maintaining the supplier's market share. This can be achieved by setting prices lower than competitors, offering greater value, or investing in marketing to increase brand awareness and attract more customers.

Question 3

Which of the following is not one of the questions that should be asked when analyzing a seller's pricing strategy?

Accepted Answer

The number of employees at the seller's plant is not directly related to their pricing strategy and therefore would not be a relevant question to ask when analyzing it.

Question 4

In the _____, prices are set to achieve a high profit on each unit by selling to supply managers who are willing to pay a higher price because of a lack of supply management sophistication or who are willing to pay for products or services of perceived higher value.

Accepted Answer

The market skimming model is a pricing strategy that sets high prices initially to achieve a high profit on each unit sold. This is used when there is a lack of supply management sophistication or when customers perceive the product or service as having a higher value.

Question 5

In the _____, suppliers are typically concerned about capacity utilization, covering fixed cost, and retaining skilled labor during market slowdowns, when they are willing to reduce their prices until market conditions change.

Accepted Answer

The answer of In the _____, suppliers are typically concerned...

Question 6

In the _____, the supplier simply takes its estimate of costs and adds a markup percentage to obtain the desired profit.

Accepted Answer

The cost markup pricing model involves adding a percentage markup to the estimated costs to determine the selling price. This method is commonly used in industries where costs are relatively stable and predictable.

Question 7

_____ applies the price/cost equation across multiple processes that span two or more organizations across a supply chain.

Accepted Answer

The concept of total cost analysis involves applying the price/cost equation across multiple processes that span two or more organizations in a supply chain. This helps in determining the total cost of a product or service, including all the costs incurred by each organization involved in the process. Thus, option E is the best choice. The other options, such as make-buy analysis, price analysis, cost analysis, and target costing, do not necessarily involve analyzing the cost equation across multiple processes or organizations in a supply chain.

Question 8

The _____ presents pricing for individual products and services that is set to enhance the sales of the overall product line rather than to ensure the profitability of each product.

Accepted Answer

The promotional pricing model is focused on stimulating sales rather than maximizing profit from each product or service. It offers discounts or deals to encourage customers to purchase more products from the line, increasing overall revenue.

Question 9

In the framework for strategic cost management, _____ are high-value products or services and can be sourced through traditional bidding approaches that require price analysis using market forces to do the work and identify what is a competitive price.

Accepted Answer

The description matches commodities, which are high-value products or services that can be sourced through traditional bidding approaches that require price analysis using market forces to do the work and identify what is a competitive price.

Question 10

In the _____, the supplier establishes a price that will provide a profit margin that is a predetermined percentage of the quoted price, i.e., not a percentage of cost.

Accepted Answer

In the margin pricing model, the supplier establishes a price that will provide a profit margin that is a predetermined percentage of the quoted price, regardless of the cost. This model is based on the idea of setting a price that covers all costs and also generates a target profit margin.

Question 11

In a/an _____ market structure, there exist identical products with minimal barriers for new suppliers to enter the market, and price is solely a function of the forces of supply and demand.

Accepted Answer

The characteristics described in the question are indicative of a perfect competition market structure. In this type of market, there are many suppliers of identical goods, with no significant barriers to entry, and prices are determined by the interplay of supply and demand. The other options (monopolistic, oligopolistic, and communistic) all involve different market structures where these conditions do not hold true. Finally, the fifth option is false since price is indeed a function of supply and demand in a perfect competition market.

Question 12

A _____ is an analytical tool that identifies the primary external forces that are causing prices to either increase or decrease.

Accepted Answer

A market analysis identifies the external forces (such as competition, consumer demand, and economic trends) that affect the price of a product or service. This analysis helps businesses make informed decisions about pricing strategies. Total cost, cost analysis, make-buy analysis, and target price analysis are not specifically focused on identifying external forces affecting prices.

Question 13

In the _____, the seller is willing to take a lower price because of the potential mass market appeal of the product, resulting in substantially higher sales volumes.

Accepted Answer

The answer of In the _____, the seller is willing...

Question 14

_____ is the process of analyzing each individual cost element (i.e., material, labor hours and rates, overhead, general and administrative costs, and profit) that together add up to the final price.

Accepted Answer

Cost analysis is the process of analyzing each individual cost element that contributes to the final price of a product or service. This helps in identifying any areas where cost-cutting measures can be applied, and in determining an appropriate selling price. Price analysis, on the other hand, involves comparing the price of a product or service to similar products or services available in the market. Total cost analysis is a general term that encompasses both cost analysis and price analysis. General and administrative costs are typically included as part of overhead costs. Make-buy analysis involves comparing the costs of producing a product or service in-house versus outsourcing it to a third-party vendor.

Question 15

​_____ = (Quality + Technology + Service + Cycle Time) ÷ Price.

Accepted Answer

The formula presented is for calculating value, which is the perceived benefit that a customer receives for the price they pay. It takes into account various factors such as quality, technology, service, cycle time, and price. Therefore, the correct choice is C, value.

Question 16

In the _____, the supplier analyzes the market to find the combination of price per unit and quantity of sales that maximizes its profit on the assumption that (1) lowering the price per unit will result in more units being sold, and (2) greater volume will spread the indirect cost over more units.

Accepted Answer

The scenario described is the basic premise of a price volume model, where a supplier seeks to find the optimal pricing and sales quantity combination that maximizes their profit. The other model options do not accurately match the given scenario.

Question 17

Which of the following is not one of the categories of products in the strategic cost management matrix?

Accepted Answer

The categories of products in the strategic cost management matrix are commodities, critical products, unique products, and generics. One-time buys are not a category of products in the matrix.

Question 18

The _____ strategy is based on determining the highest price that can be offered to the supply manager that will still be lower than the price offered by competitors.

Accepted Answer

The competition pricing model is based on determining the highest price that can be offered to the supply manager that will still be lower than the price offered by competitors. This ensures that the company remains competitive in the market while still making a profit.

Question 19

In the _____, the desired profit is added to the estimated costs.

Accepted Answer

In the rate-of-return pricing model, the desired profit is added to the estimated costs to determine the final price. The other pricing models listed do not necessarily factor in desired profit as a primary consideration.

Question 20

The emphasis of the _____ is on obtaining sufficient current revenue to pay for operating cost rather than on profit.

Accepted Answer

The revenue pricing model emphasizes obtaining sufficient current revenue to cover operating costs, without necessarily focusing on generating profit. This approach is commonly used by businesses that are just starting out, or those that are looking to establish a strong foothold in a crowded market.

Quiz 11: Strategic Cost Management