Ch 11

The learning curve is based on

the commonly recognized principle that one becomes more proficient with experience

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

total cost ownership

Activity based costing attempts to

turn indirect costs into direct costs by tracking the cost drivers behind indirect costs

When cost analysis is applied to a suppliers price, the buyer focuses on identifying an overall cost reduction target with little insight into specific cost elements

False

when developing a negotiation strategy, the negotiator should assess the positions of strength of both (all) parties to

a b & c decide if negotiation makes sense establish negotiation points avoid setting unrealistic expectations

Target pricing may result in companywide cost reductions in

a b & c design to cost manufacture to cost purchase to cost

sources of sustainable competitive advantage include

a b & c product differentiation low cost a combination of product differentiation and cost leadership

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

all of the above (highlight cost reduction opprotunities, compare suppliers in a supplier selection decision, prepare for negotiation, assess the reasonableness of a suppliers prices.)

In portfolio analysis, the goal when purchasing strategic goods or services is to

assure continuous supply at lowest cost of ownership

In portfolio analysis, the goal when purchasing leverage items is

assure continuous supply at lowest total cost of ownership

when developing a negotiation strategy, the negotiator should assess the positions of strength of both (all) parties to

decide if a negotiation makes sense; establish negotiation points; avoid setting unrealistic expectations.

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

determine the return on investment

Although associated with a number of factors, the learning curve normally is most closely identified with the analysis of

direct labor costs

Activity based costing can be used by the buyer to

eliminate nonvalue-adding activities; reduce activity occurrences, and reduce the cost driver rate

When estimating the costs of a manufacturing supplier

equipment depreciation is typically the largest single cost element in overhead

The zone of negotiation

indicates the feasibility of negotiation and the likelihood of agreement

In portfolio analysis, the goal when purchasing non-critical of routine spend is to

minimize acquisition time and cost

In portfolio analysis, the goal when purchasing bottleneck items is

reduce or eliminate customization

Target Pricing

starts with the selling price of an organization's end product minus the operating profit to establish the target cost

An externally focused process of analyzing costs in terms of the overall value chain is called

strategic cost management

Which tool will focus everyone in the organization on cost management

target pricing

Value engineering (VE) and value analysis (VA) refer to the same process, but VE is applied to the design stage and VA is applied to redesign

True

Value methodology is a systematic approach to analyzing the functions of a product, part, service, or process to satisfy all needed quality and user requirements at optimum total cost of ownership

True

A unique cost model is one that applies to a variety of common supply situations

False

Activity based costing primarily is an accounting process that has little practical value for buyers

False

Besides price determination, there are very few areas in supply management where negotiation is a useful and cost effective tool

False

Educating suppliers about buying organizations operations is an example of a transaction

False

If the goal of negotiation is performance, the the process and tactics used during the negotiation are important because they have a great impact on the intention to perform

True

In negotiation, a fact is any piece of information on which the buyer believes he or she can negotiate an agreement with the supplier

True

In planning for negotiation, a factor or item of information over which disagreement is expected is known as an issue

True