MKT 367 Ch 10

Online reverse auctions are useful means of price determination for customized items.

False

Governments typically play no role in establishing prices or regulating how buyers and sellers are allowed to behave in agreeing on prices.

False

Canceling a contract for a technicality when market prices are falling is considered an unacceptable and unethical practice.

True

An exception to firm bidding allows the buyer and bidders the flexibility to clarify and define specifications and prices after the initial bids are received and then bidders submit best-and-final-offers (BAFOs).

True

Competitive bidding, in general, is the most efficient means of obtaining a fair price for items bought.

True

Farmers turn to marketing and production contracts when they perceive the efficacy of spot markets to be inadequate in handling their risks, and processors turn to contracts as a way to encourage farmers to produce specific products at desired times.

True

A cash discount of 1/15, N/30 (1 percent cash discount if payment is made in 15 days, with the gross amount due in 30 days) is the equivalent of what approximate interest rate? a. 24 percent. b. 30 percent. c. 36 percent. d. 45 percent. e. 54 percent.

a. 24 percent.

If the delivery date is some months or years away and if there is substantial chance of price escalation, a supplier may feel that there is far too much risk of loss to agree to sell under a: a. firm-fixed-price (FFP). b. firm-fixed-price plus incentive fee (FFPIF). c. cost-no-fee (CNF). d. cost-plus-fixed-fee (CPFF). e. cost-plus-incentive-fee (CPIF)

a. firm-fixed-price (FFP).

Costs incurred in the operation of a production plant or process, are called: a. direct costs. b. indirect costs. c. variable costs. d. semivariable costs. e. fixed costs.

b. indirect costs.

Hedging is a way to: a. ensure receipt of proper quantity. b. try to minimize price and exchange risks. c. ensure on-time delivery. d. guarantee maximum returns. e. obtain the quality that is needed

b. try to minimize price and exchange risks.

Accepting a price discount for ordering larger quantities leads to lower levels of anticipation inventory.

False

Information regarding price trends cannot be easily obtained because most organizations are reluctant to share cost and price information.

False

The purchasing manager indexes (PMIs) are lagging economic indicators derived from monthly surveys of purchasing managers about forecasted company conditions.

False

An escalator clause provides for an increase, but not a decrease, in price if costs change.

True

The cost approach to pricing: a. is the only defensible pricing mechanism for ethical companies to use. b. implies that prices are set based on the cost the market will bear. c. means prices are set to cover direct costs, contribute to indirect, and attain profit. d. means prices are adjusted to ensure the selling organization recoups all costs. e. Implies that cost analysis is the only technique to be used to negotiate prices.

c. means prices are set to cover direct costs, contribute to indirect, and attain profit.

The prime function of an organized commodity exchange is to furnish an established marketplace where: a. commodity prices can be controlled. b. sellers of the same commodity can come together to set prices. c. the forces of supply and demand operate freely. d. products that are difficult to grade can be traded. e. there are only a limited number of buyers and sellers.

c. the forces of supply and demand operate freely.

The fairest possible means of treating all suppliers alike in a competitive bidding situation is to: a. allow all bidders to change their bids prior to the bid opening. b. allow for negotiation after all bids are received. c. relate imaginary bids to give prospective suppliers a number to work with. d. establish a policy of firm bidding. e. none of the above because competitive bidding is not fair.

d. establish a policy of firm bidding.

Items for which prices are comparatively low, and the cost of price reduction efforts may exceed any price savings realized, are called: a. parts, components, and packaging. b. raw materials. c. services. d. maintenance, repair, and operating supplies. a. capital assets.

d. maintenance, repair, and operating supplies.

This bond guarantees work will be done according to specifications and in the time specified, and if another supplier does rework or completes the order, purchasing is indemnified for these extra costs. a. bid bond b. lien bond. c. payment bond. d. performance bond. e. surety bond.

d. performance bond.

The lowest price that ensures a continuous supply of the proper quality where and when needed and allows the supplier to make a reasonable profit, is commonly known as: a. a market price. b. a cost-based price. c. a buyer's market price. d. a seller's market price. e. a fair price.

e. a fair price