mktg 333 Final Exam

Most direct costs are:

1. variable costs.

The market approach to pricing:

3. implies that prices are set based on what the market will bear.

Forward buying:

3. involves purchasing for known or estimated near-term requirements.

Identical prices received from various sources should:

4. draw attention if the specification is complex or detailed.

The preferred hierarchy of supply chain strategies is (1) source reduction—design or use less, (2) reuse—multiple use of same item such as a package or container, (3) recycle—reprocess into raw material, (4) incinerate—at least extract energy, but create CO2 pollution at a minimum, (5) landfill—require space and transportation to store with potential impact on land and water.

True

Governments play a role in establishing prices by establishing production and import quotas and by regulating the ways that buyers and sellers are allowed to behave in agreeing on prices.

True

If a supplier fails to deliver goods which meet the contract agreement, one of the buyer's options is to reject the whole shipment

True

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

True

In many organizations, standards of conduct for purchasing personnel stress the need to avoid all appearances of impropriety.

True

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

True

In the U. S., product liability is generally considered a strict liability offense which means that the defendant is liable when it is shown that the product was defective

True

Loss exposure can be reduced by matching decisions about packaging, transportation, and security levels with the risk of loss.

True

Mediation and arbitration are examples of alternative legal means of settling disputes.

True

One justification for a quantity discount is that the buyer should not pay more than the actual cost of packing, crating, and transportation.

True

Payment made to a supplier does not automatically constitute an acceptance of the goods.

True

Supplier development initiatives may be focused on (1) persuading an existing supplier to expand into new areas that meet the needs of the buying organization, and (2) locating a new, untried/unknown company and identifying potential areas of business.

True

The Robinson-Patman and Sherman Antitrust Acts are primarily designed to prevent the stronger party from imposing too onerous conditions on the weaker one and preventing collusion so that competition will be maintained.

True

The Uniform Commercial Code (UCC) covers the purchase of goods and services, if the goods portion of the contract is more than 50 percent of the contract value.

True

The buyer's assessment of the risk associated with a supplier is influenced by whether it is a non-critical, leverage, bottleneck, or strategic purchase.

True

In portfolio analysis, the goal when purchasing leverage items is

a. minimize total cost of ownership.

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

a. strategic cost management.

The prime function of an organized commodity exchange is to furnish an established marketplace where:

a. the forces of supply and demand operate freely.

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

b. assure continuous supply at lowest cost of ownership.

If the buyer wants to motivate the seller to manage total costs, the best type of contract is:

b. cost-plus-incentive-fee (CPIF)

When estimating the costs of a manufacturing supplier

b. equipment depreciation is typically the largest single cost element in overhead.

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

5. MRO items.

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

D. direct labor costs.

Target pricing may result in company wide cost reductions in

E. a, b, and c.

A cash discount of 2/10, N/30 (2 percent cash discount if payment is made in 10 days, with the gross amount due in 30 days) is the equivalent of approximately a 36 percent interest rate.

True

An escalator clause provides for an increase, as well as a decrease, in price if costs change.

True

The question of how much of a premium should be paid to conform with political directives such as Buy Local or Buy American is the subject of much ongoing debate.

True

To be fair, the basis and terms of cancellation should be agreed on in advance and made part of the terms and conditions of the purchase order.

True

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

In the portfolio matrix, characteristics of goods and services in the leverage quadrant are

a. competitive supply market, substitution is possible, price per unit is important.

Reverse marketing

a. encouraged by the rapid rate of technological change, growth in international trade, and the need to extract competitive advantage from supply chains.

When the goods fit the ordinary purpose for which goods of that description are used in the trade, there is a(n)

a. implied warranty of merchantability.

When it comes to product liability, supply management

a. lowers risk by ensuring that suppliers deliver defect-free goods.

The authority that is necessary, usual, and proper to carry through to completion the express authority conferred, is called

b. implied authority

A fair price

b. is the lowest price that ensures a continuous supply of the proper quality where and when needed and at which the supplier makes a reasonable profit.

Distributors, wholesalers, and retailers

b. may be able to deliver at a lower cost than the manufacturer.

Commercial bribery

b. may become an industry practice.

Assessment of a potential supplier's financial situation

b. may yield substantial opportunities for negotiating favorable terms for both buying and selling organizations.

Which of the following is a factor in determining the validity of a contract?

b. offer and acceptance.

Target pricing

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

Supply management's role in environmental considerations is

c. expanding because the goal of zero environmental impact affects the buying cycle.

If a termination for convenience clause is included in a services contract

c. if exercised in bad faith, it may mean the termination is a breach of contract.

In a contractual dispute between buyer and seller, the process of elevating the discussion from buyer and sales representative up through the organization and out to an unbiased referee is called

c. internal escalation.

Decision trees

c. may be useful in making effective supplier selection decisions if probabilities of success and failure are assessed for each option.

The Sarbanes-Oxley Act

c. requires listing off-balance sheet items such as long-term purchase agreements.

A cash discount allows

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

Which of the following statements supports single sourcing: a. there is a need to reduce supplier dependence on the buying organization. b. there is a high probability of a devastating natural disaster. c. there is a patent involved. d. there is volatility in the supply market. e. concerns exist about supplier capacity for future volume.

c. there is a patent involved.

Activity based costing attempts to

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

Portfolio or quadrant analysis

d. a and b.

Sources of sustainable competitive advantage include

d. a, b and c

Small suppliers

d. often provide the greatest responsiveness and flexibility.

In the event the bidder does not make proper payment to its suppliers, the bond that protects the buyer against liens that might be granted to these suppliers, is called a:

d. payment bond.

The legal authority of a salesperson normally is

d. to solicit orders and get ratification and acceptance from his or her employer.

To avoid risk, a buyer can A. hedge in a commodities market. B. require bid or performance bonds. C. decide not to do business in certain countries. D. a and b. E. a, b, and c.

e. a, b, and c.

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

e. a, b, and c.

Corporate social responsibility

e. extends beyond ethics to include community, environment, and human rights.