MGT 327 Exam 2

Target pricing provides a

1. means of measuring the supplier's efficiency. 2. yardstick for measuring cost reductions. 3. measurable target for supply performance.

Price discounts can be used for

1. negotiated annual contracts. 2. blanket orders. 3. cumulative discounts.

Ellram developed a model to analyze total cost of ownership using

1. post-transaction costs. 2. transaction costs. 3. pretransaction costs.

Supplier selection decisions can involve more than information, other considerations are

1. single vs multiple sourcing. 2.geographical locations. 3. supplier size. 4. manufacturer vs distributer.

Target pricing works best when

1. there is buyer and seller loyalty. 2. the customer has leverage. 3. the supplier benefits from cost reductions.

The supply manager for ABC manufacturing should ensure that a single customer is purchasing no more than to ____ % _____ of their product.

20 to 30

There are ____ general classes of purchases.

7

Managers should focus more time and attention on

A category items.

The supply manager for ABC manufacturing needs to purchase goods where demand is irregular, who should he use to purchase the goods from?

A distributor or wholesaler

The supply manager has reached out to manager for the marketing department for information concerning a potential supplier. What form information source was utilized?

Colleagues

What are the most common sources of supply information?

Company websites E-catalogs Online searches

What varies in proportion to the quantity purchased and is based on the quantity purchased over a period of time not on the size of any one order. It is an incentive for continued patronage and the concentration of orders with a single supplier.

Cumulative discounts

Value =

Function/Cost

Strategic

High profit impact, high supply risk

Leverage/Commodity

High profit impact, low supply risk

A category

High-dollar value

the supply manager for ABC manufacturing has a challenging supply need, which information request would be the best option?

Request for proposal (RFP)

The ______________ states that suppliers offer the same item to all customers for the same price.

Robinson-Patman Act

What costs affect labor costs that manufacturers need to watch carefully?

Run sizes Labor turnover Product mix

The supply manager for ABC manufacturing needs to procure a new product quickly and must obtain references to sources of supply while reviewing all available types of products for thorough evaluation and, which source of information would be best?

Sales representatives

What is the correct formula for target cost?

Target cost = Estimated selling price - desired profit.

Which act restricts conspiracy, collusion, or a combination of in regards to interstate commerce?

The Sherman Antitrust Act

Supply managers must ensure that all required materials or parts meet quality standards and are available when needed by establishing a ____ price for purchases.

fair

Prices on the commodity exchange accurately represent supply and demand.

false

True or false: Only single source suppliers can be used for procurement.

false

Indirect costs may be

fixed. semivariable. variable.

_____ buying is a process related to retail inventories, financial instruments, assets etc, wherein they are purchased in quantity excess to demand to counter future price rise.

forward

The ____ of a product is the noun-verb combination.

function

involves purchasing the same commodity now and in the future.

hedging

Capital assets have ____ a dollar value.

high

Price checking is normally ____ with MRO or small value purchases.

ignored

Many organizations do not focus on ______ costs which are rich with potential savings.

indirect

Hedging can be seen as a form of

insurance.

Specialty item procurement requires a ___or ____ analysis.

make or buy

The prices for raw materials are driven by _____ prices.

market

Requests for proposals are typically ____ expensive for suppliers.

more

A -- clause is a contractual arrangement between vendor and customer that guarantees the customer the best price the vendor gives to anyone.

most favored customer

____ or ______ costs are reviewed during cost analysis

actual or future

The focus of strategic cost management

analyzes costs externally.

Resale purchases provide a profit for the

buyer and seller

A cost-plus-fixed-fee is used when future costs ____ be predicted.

cannot

Marketing and production contracts in agriculture are used instead of ____ sales.

cash

Virtually every sell offers ____ discounts.

cash

ABC manufacturing has set the price for a popular component at 10% over direct costs, this is a approach for ____ pricing.

cost

When no extra is reimbursed above actual cost, this is a

cost-no-fee

CPOs face the challenges of _____ with reporting cost savings.

credibility

The market can affect the pricing of commodities on a ______ basis.

daily

To enhance the organizations negotiation session the supply manager should ensure the best _____ is (are) available.

data

The forward buying decision maker will

depend up on the organizational structure.

The primary costs for operating a service business are ____ and ____ labor.

direct and indirect

What are the classifications of costs?

direct and indirect

Contract cancellations normally happen when prices ____

drop or fall

A(n) _________ clause provides for either an increase or decrease in price if costs change.

escalator

Onshoring sources can be

national. regional. local

When providing a service, price ____ is more common to determine a price.

negotiating

Services organizations who wish to avoid or reduce costs can benefit by improving their

operating efficiency. productivity.

Small suppliers can offer the benefits of

product availability. flexibility. speed of response.

Total cost of ownership include the actual cost of a good or service and all ____ costs.

relevent

Commodities can be _____from the exchange if volumes are too small.

removed

Pricing for capital asset purchases can be accomplished by

request for proposals. competitive bidding. negotiation.

Serious requests that ask the supplier to specify pricing and terms are called

request for quotation (RFQ).

During an RFI there are signification costs involved, these should be the responsibility of the

requesting organization.

The_____ or _____ assumes that the supplier can meet all specification requirements.

RFQ RFB

Most service contracts

1. estimate time required to complete. 2. may quote based on percentage of total job cost. 3. can contain limitations for cost and time.

ABC manufacturing sells packaged food to end customers. ABC can only charge $40 per unit. If the company's intended profit margin is 10% on the selling price, the target cost per unit is $

$36

Negotiation can be used to achieve

1. faster changes to engineering specifications. 2. higher quality. 3. lower pricing.

What is the focus of strategic cost management?

1. Applying supply chain tools and techniques. 2. Sustain cost savings year after year.

What are the basic reasons for forward buying?

1. Assurance of supply to meet requirements. 2. Assurance of supply to meet price.

Which of the following are the disadvantages or concerns of LCC?

1. Awareness of future costs. 2. What the start-up costs will be. 3. Uncertainty about the volume the machine will produce or be sued.

Contracts are beneficial for farmers to

1. manage price and production risks. 2. smooth the flow of commodities to processing plants. 3. produce specialty plants with relative pricing.

This pricing option does not allow changes.

Firm-fixed-price

Where can the supply manager locate pricing trends

1. Expert data 2. Purchasing manager indexes 3. Commodity exchanges

What are some options for price changes?

1. Guarantee against price decline 2. Price protection clause 3. Escalator clause 4. Most-favored-customer clause

What options do supply managers have to meet organizational needs?

1. Make the product in house. 2. Purchase the product from a current supplier. 3. Purchase the product from a new supply source.

What conditions should be met to best serve commodity exchanges?

1. The market contains a large enough volume of buyers and sellers. 2. The products traded are capable of reasonable price grading.

What are the uncertainties with forward buying?

1. Will the need be realized. 2. Will the future price be higher or lower than current.

A request for information serves the purpose of

1. allowing a supplier to express interest in a business relationship. 2. signaling a potential supplier has been identified.

MRO purchases can be made through

1. buying on a cost-plus basis. 2. e-procurement systems. 3. internal procurement cards.

The most commonly watched indicator of industrial purchase prices is the PPI and is released monthly by the

Bureau of Labor Statistics

What are the types of contract options for pricing?

Firm-fixed-price Cost-plus-incentive-fee Cost-no-fee Cost-plus-fixed-fee

True or false: Once a fair price is established, that is the price all buyers will pay.

False

True or false: Price changes for parts and components are high and more frequent than raw materials.

False

What is used to describe the analysis of costs throughout products life including planning, design, operation, maintenance, repair, replacement, demolition as well as disposal or reuse?

Life-Cycle Costing (LCC)

Bottleneck

Low profit impact, high supply risk

Noncritical/Routine

Low profit impact, low supply risk

C category

Low-dollar value

B category

Medium-dollar value

What costs are typically indirect that are incurred during the manufacturing of a good?

Overhead costs

To control forward buying, companies should establish

safegaurds

Manufacturers typically rely on ____ for purchasing parts, components, and packing.

salespeople

taking advantage of price movements is the goal of

speculation

A major limitation for commodity exchanges is

that grading is often not sufficiently accurate for all industries.

Two traditional methods for establishing prices are

the cost approach. the market approach.

True or false: In the event a product cannot be sourced with current or new suppliers and cannot be produced in house, supply managers can seek alternative products to meet requirements.

true

True or false: Supply managers should not use deceptive means to get lower pricing.

true

True or false: The buyer should not pay more than the actual cost of auxiliary services.

true

Along with price, analysis of suppliers' costs is also dependent upon the ____ of product being sourced.

type

The supply manager for ABC manufacturing has chosen to end the contract with a supplier due to falling market prices, is the justified or unjustified.

unjustified

Using a portfolio analysis, supply managers evaluate spend and classifying them using _____ and _____.

value. risk.

Most direct costs are ________.

variable.