Question 1

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 fits the definition of commodity products, which are high-volume, low-cost items that can be sourced through traditional bidding approaches that rely on market forces to determine a competitive price. Critical products are essential to the organization's operations, unique products are tailored to specific customer needs, custom-made products are designed according to client specifications, and generics are unbranded products that compete on price.

Question 2

____ indicates whether a seller can lower its cost as a result of the repetitive production of an item.

Accepted Answer

Learning-curve analysis is used to determine the rate at which a company's production costs decrease as it becomes more experienced in producing a product. As more units are produced, the company may learn better ways to produce the product, resulting in lower production costs.

Question 3

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 to...

Question 4

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

Accepted Answer

In the revenue pricing model, suppliers focus on maximizing revenue, often by adjusting prices to ensure capacity utilization and cover fixed costs, especially during market slowdowns.

Question 5

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 relevant to analyzing their pricing strategy. The other options are all important factors to consider when analyzing a seller's pricing strategy.

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 the supplier adding a markup percentage to their estimate of costs to obtain the desired profit. This is a common approach in many industries where there is a high degree of competition and pricing pressure. The supplier simply adds a markup on top of their costs and hopes to achieve a price that is competitive with other suppliers in the market.

Question 7

All of the following are opportunities for supplier cost reductions except ____.

Accepted Answer

The ability to vote out the supplier's labor union is not a legitimate opportunity for supplier cost reductions as it involves external factors beyond the supplier's control. The other options (process capability, plant utilization, learning-curve effect, and management capability) are all internal factors that can be optimized by the supplier to reduce their costs and offer more competitive prices to their customers.

Question 8

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

Accepted Answer

The promotional pricing model presents pricing for individual products and services that is intended to enhance the sales of the overall product line rather than to ensure the profitability of each product. This type of pricing is used to attract customers, create excitement, and increase sales for a limited period of time.

Question 9

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 focuses on generating enough revenue to cover operating costs, rather than prioritizing profit. This approach is often used by businesses that are in their start-up phase or those that operate in highly competitive markets. The other pricing models listed prioritize other factors such as increasing sales volume, maintaining a competitive edge or maximizing profit margins.

Question 10

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

Accepted Answer

Market analysis helps identify the external forces affecting prices, such as supply and demand, competition, and market trends. Total cost analysis, cost analysis, make-buy analysis, and target price analysis do not specifically focus on external forces affecting prices.

Question 11

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

Accepted Answer

The rate-of-return pricing model involves adding the desired profit to the estimated costs in order to determine the final price. This model takes into consideration the company's desired rate of return on investment and ensures that the price charged will allow them to achieve that return.

Question 12

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 Price volume model involves finding the optimal combination of price per unit and quantity of sales that maximizes profit. This model considers the relationship between price and volume, assuming that a lower price per unit will result in more units being sold, and that greater volume will spread the indirect cost over more units.

Question 13

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 involves setting high prices to achieve high profits by targeting supply managers who are willing to pay a higher price due to a lack of supply management sophistication or because they perceive the product or service as having a higher value.

Question 14

In a/an ____ market structure,price is solely a function of the forces of supply and demand.

Accepted Answer

In perfect competition, there are a large number of buyers and sellers, homogeneous products, free entry and exit, and perfect information. In this market structure, no single buyer or seller has control over prices, and hence prices are determined solely by the forces of supply and demand.

Question 15

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

Accepted Answer

In the market-share model, the pricing is based on the assumption that long-run profitability depends on the market share obtained by the supplier. The supplier aims to achieve a larger market share by pricing their product lower than their competitors, hence increasing their customer base. This, in turn, will lead to increased profitability in the long run.

Question 16

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

Accepted Answer

Total cost analysis applies the price/cost equation across multiple processes that span two or more organizations across a supply chain. It considers all costs incurred throughout the supply chain, including transportation, storage, and inventory costs, and aims to minimize the total cost while maintaining desired levels of quality and service.

Question 17

In ____,a buyer may use internal engineering estimates about what it costs to produce an item,rely on historical experience and judgment to estimate costs,or review public financial documents to identify key cost data about the seller.

Accepted Answer

Reverse price analysis involves estimating the cost of a product by analyzing the seller's costs, often using internal engineering estimates, historical data, or public financial documents.

Question 18

In the ____,the supplier establishes a price that will provide a profit margin that is a predetermined percentage of the quoted price.

Accepted Answer

In the margin pricing model, the supplier determines the selling price by establishing a margin (profit percentage) on top of the cost of production. This ensures that the supplier earns a profit and covers their costs while remaining competitive in the market. The other options mentioned involve different pricing strategies that involve factors like competition, desired market share, and cost management goals.

Question 19

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 strategy is commonly used to gain market share or to compete with existing players in the market.

Question 20

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

Accepted Answer

One-time buys are not a category in the strategic cost management matrix. The categories are Commodities, Critical products, Unique products, and Generics.

Quiz 11: Strategic Cost Management