UNCW SABA 379 FINAL EXAM Spring 2019

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

False

In portfolio analysis, bottleneck items are characterized by high risk and high value.

False

Target costing may result in company-wide cost reductions in design to cost, manufacture to cost, and purchase to cost.

True

The cost per hundredweight (CWT) is generally higher for LTL shipments compared to TL shipments.

True

Cost management tools and techniques that may provide data for negotiations with internal organization stakeholders and / or externally with suppliers include:

activity-based costing, the learning curve and total cost of ownership.

Transportation rates:

are established primarily through negotiation.

Portfolio analysis is:

the categorization of spend map based on the risks to acquire in the marketplace and value.

In portfolio analysis, cost analysis can be used in the acquisition of strategic goods or services to identify opportunities to:

avoid, eliminate or reduce costs in buyer and supplier cost structures.

FCA - Who bears the cost and risk of loading the goods at origin and unloading at the destination?

Loading = Seller, Unloading = Buyer

FCA - Is seller obligated to stow the goods in buyer's container upon delivery on seller's location?

NO

EXW - Must seller load on buyer's vehicle?

No

FCA - Who pays Export clearance?

Seller

FOB - Must seller make sure that the goods are stowed / trimmed on board the ship?

no

Hedging is a way to:

try to minimize price and currency exchange risks.

The goal of value engineering and value analysis is to:

perform a function at the same or an improved level while reducing costs.

Common methods of analyzing total costs of ownership (TCO) include:

standard cost models, unique cost models and segregating costs on the basis of pre-transaction, transaction and post-transaction costs.

Purchases categorized as leverage items in portfolio analysis have the following characteristics:

standard specification or commodity-type items.

FCA - Who pays Transport cost up to FCA delivery point (named place) or up to the main carrier's receipt of the goods?

Seller

FOB - Who pays Terminal Handling Charges (THC)?

Seller

FOB - Who pays for the pre-carriage?

Seller

The lowest bid may not receive the order if:

the buyer discovers the lowest bidder is unrealistic, the lowest bid is higher than the buyer believes justifiable and there is reason to believe the bidders colluded.

With deregulation of the transportation industry and the development of intermodal service, the focus for the transport buyer is:

the carrier's ability to handle multiple parts of the logistics process.

Under the Cost, Insutance, and Freight Incoterms Rule,

the insurance must total at least 11 percent of the value of the goods.

A cash discount allows:

the seller to secure prompt payment and the buyer to pay a lower price per unit.

Target costing starts with:

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

Integrated carriers (truck-air), such as UPS and Federal Express, are able to capture a larger market share because they:

utilize their own aircraft, have extensive ground networks and have accurate, real-time logistics tracking systems.

The selection of the FOB point is important to the purchaser, because it determines:

who pays the carrier, when legal title to goods being shipped passes to the buyer, who is responsible for preparing and perusing loss or damage claims and who routes the freight.

Compared to motor carriers, rail:

is relatively inflexible and slow, and has higher damage rates.

When using competitive bidding to determine prices, the purchaser should ensure that the bidders are:

qualified to make the item or service in a accordance with the buyer's specifications, able to deliver it by the desired date, sufficiently reliable and numerous enough to ensure a truly competitive price.

In portfolio analysis, the goal when purchasing bottleneck items is to:

reduce or eliminate customization.

If identical bids are received, the buyer might choose to:

reject all bids and negotiate with one or more suppliers.

A cash discount of 1/15, N/30 (1 percent cash discount if payment is made in 15 days, with the griss amount due in 30 days) is the equivalent of what approximate interest rate?

24 percent.

Purchasers can use activity-based costing to:

eliminate non-value activities, reduce activity occurrences and reduce the cost driver rate.

The choice of a proper Incoterms Rule is a critical Decision because

All of the above

EXW - What happens if seller assists with the loading anyway?

Buyer assumes responsibility (unless stated in contract)

Qualifying sources is an example of a post-transaction cost phase in the total cost of ownership model.

False

Third-party logistics service providers (3pls) are carriers that always own assets (trucks, airplanes, railcars) and act as intermediaries between trading partners, for example, shippers and carriers.

False

Truckload (TL) shipments are typically for short haul distances compared to less-than-truckload (LTL) shipments.

False

CIF - Who pays terminal handling charges (THC) in port of arrival?

Buyer

FCA - Who pays Airport charges and transport security fee?

Buyer

FCA - Who pays Terminal handling charges at port of export?

Buyer

FCA - Where does the transfer of risk take place?

Delivery point or delivery to carrier

Value engineering (VE) and value analysis (VA) use the same methods, but VA is performed in the design stage and VE is performed in the redesign stage.

False

In terms of cost and responsibility, the easiest Incoterms Rule for the exporter whicj is, in turn, the most difficult for the importer is

Ex-Works (EXW).

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

False

FinTech firms assist manufactures in the development and implementation of process technology innovation.

False

Indirect costs can be specifically and accurately assigned to a given unit or production or a specific identifiable task performed by a service provider.

False

Marine transport is best suited for products of high value and / or extremely perishable.

False

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

False

Organizations operating under a just-in-time system, prefer to ship by:

Truck

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

True

In portfolio analysis, strategic goods and service are both more valuable to the buying organization and riskier to acquire.

True

Life cycle costing can be used to justify the acquisition of expensive equipment on the basis of lower operating costs over the life of the asset.

True

Logistics cost can be divided into three categories: inventory carrying costs, administrative costs, and transportation (with transportation costs accounting for the bulk of the costs).

True

Logistics is the management of inventory in motion and at rest.

True

Transportation costs increase as distance, quantity, and speed increase.

True

Two effective logistics cost reduction strategies are partnering agreements with logistics services providers and long-term contracts.

True

Fuel efficiency and energy consumption considerations:

are a factor in transportation strategy development in many organizations.

Marine transportation is:

best suited for hauling large tonnage over long distances and disadvantaged because of the need for suitable networks, which are dependent on government support.

Decreasing total business logistics costs as a percentage of the U.S. GDP may be attributed to:

deregulation of the transportation sector, and improved logistics technology systems and e-commerce.

Labor and material costs are typically:

direct costs.

When estimating the cost structure of a manufacturing supplier:

equipment depreciation is typically the largest cost element in overhead.

The fairest possible means of treating all suppliers alike in a competitive bidding situation is to:

establish a policy of firm bidding.

If the delivery date is some months or years away and if there is substaincal change of price escalation, a supplier may feel tha there is far too much risk of loss to agree to sell under a:

firm-fixed-price (FFP).

Compared to other modes of transportation, motor carriers provide the advantage of:

flexibility of point-to-point service.

When cost analysis is applied to a supplier's price, the buyer:

identifies and analyzes each cost element for cost reduction opportunities.

While on the surface Incoterms rules determine who pays what when, ultimately the _____________ directly or indirectly pays the cost of transportation and international shipping.

importer

Costs incurred in the operation of a production plant or process, but normally cannot be related directly to any given unit of production or service provided, are called:

indirect costs.

Incoterms Rules stands for

international commerce terms.

A straight bill of lading:

is used when the goods have been paid for in advance of shipment and require delivery.

Items for which prices are comparatively low and the cost of price reduction efforts may exceed any price savings realized are:

maintenance, repair, and operating supplies.

Life cycle costing (LCC):

may include costs that are 10-15 years in the future and highly uncertain.

Demurrage charges:

may indicate poor delivery scheduling on the part of the buying organization.

The cost approach to pricing:

means prices are set to cover direct costs, contribute to indirect costs, and provide a profit.

A purchasing approach to minimize costs and rely on competition to keep prices low is best suited for:

noncritical / routine items.

This bond guarantees work will be done according to specifications, in the time specified, and if another supplier does rework or completes the order, purchasing is indemnified for these extra costs.

performance bond.

A transportation strategy should include consideration of:

safety on the ground, in the air and on the water, environmental factors, such as pollution, consolidation of freight and alternative transport modes.