Question 1

With _____, a product's allowable cost is strictly a function of what a market segment is willing to pay less the profit goals for the product.

Accepted Answer

A)  penetration pricing 
B)  target pricing 
C)  market-share pricing 
D)  should-cost modeling 
E)  revenue pricing 
A)  penetration pricing 
B)  target pricing 
C)  market-share pricing 
D)  should-cost modeling 
E)  revenue pricing

Question 2

The value of money spent any time in the future does not depend on the organization's cost of capital.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not one of the categories of products in the strategic cost management matrix?

Accepted Answer

A)  Commodities. 
B)  One-time buys. 
C)  Critical products. 
D)  Unique products. 
E)  Generics. 
A)  Commodities. 
B)  One-time buys. 
C)  Critical products. 
D)  Unique products. 
E)  Generics.

Question 4

The market-share model is also known as the penetration pricing model and is an aggressive pricing approach for efficient producers because price is a direct function of cost.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements regarding cost-savings sharing is false?

Accepted Answer

A)  Cost-sharing approaches require joint identification of the full cost to produce an item. 
B)  Profit is a function of the productive investment committed to the purchased item and a supplier's asset return requirements. 
C)  The cost-based approach provides a supplier with incentives to pursue continuous performance improvement to realize shared cost savings and invest in productive assets. 
D)  Profit is a direct function of cost. 
E)  In the traditional market-based pricing approach, one party (usually the purchaser) seeks to capture all cost savings resulting from a supplier's improvement effort. 
A)  Cost-sharing approaches require joint identification of the full cost to produce an item. 
B)  Profit is a function of the productive investment committed to the purchased item and a supplier's asset return requirements. 
C)  The cost-based approach provides a supplier with incentives to pursue continuous performance improvement to realize shared cost savings and invest in productive assets. 
D)  Profit is a direct function of cost. 
E)  In the traditional market-based pricing approach, one party (usually the purchaser) seeks to capture all cost savings resulting from a supplier's improvement effort.

Question 6

In the _____, the supplier analyzes the market to find the combination of price per unit and quantity of sales that maximizes its profit on the assumption that (1) lowering the price per unit will result in more units being sold, and (2) greater volume will spread the indirect cost over more units.

Accepted Answer

A)  price volume model 
B)  sole sourcing model 
C)  market-share model 
D)  market skimming model 
E)  promotional pricing model 
A)  price volume model 
B)  sole sourcing model 
C)  market-share model 
D)  market skimming model 
E)  promotional pricing model

Question 7

A should-cost model can lead the procurement manager to better understand elements of overhead, mark-ups on non-value-added costs, and other components that can undermine price inflation.

Accepted Answer

A) True 
 B)False

Question 8

In the _____, the desired profit is added to the estimated costs.

Accepted Answer

A)  penetration pricing model 
B)  revenue pricing model 
C)  margin pricing model 
D)  rate-of-return pricing model 
E)  TCO model 
A)  penetration pricing model 
B)  revenue pricing model 
C)  margin pricing model 
D)  rate-of-return pricing model 
E)  TCO model

Question 9

_____ include(s) all costs incurred when a product, service, or capital equipment reaches the end of its useful life, net of amounts received from the sale of remaining product or the equipment (salvage value).

Accepted Answer

A)  Net present value costs 
B)  Usage costs 
C)  Purchase price 
D)  End-of-life costs 
E)  Opportunity costs 
A)  Net present value costs 
B)  Usage costs 
C)  Purchase price 
D)  End-of-life costs 
E)  Opportunity costs

Question 10

In the _____, pricing is based on the assumption that long-run profitability depends on the market share obtained by the supplier.

Accepted Answer

A)  price volume model 
B)  market-share model 
C)  open market model 
D)  target pricing model 
E)  market skimming model 
A)  price volume model 
B)  market-share model 
C)  open market model 
D)  target pricing model 
E)  market skimming model

Question 11

In TCO, _____ is the amount paid to the supplier for the product, service, or capital equipment.

Accepted Answer

A)  acquisition cost 
B)  usage cost 
C)  end-of-life cost 
D)  purchase price 
E)  opportunity cost 
A)  acquisition cost 
B)  usage cost 
C)  end-of-life cost 
D)  purchase price 
E)  opportunity cost

Question 12

A cost-based approach to supplier pricing is feasible when the seller contributes high added value to an item through direct or indirect labor and specialized expertise.

Accepted Answer

A) True 
 B)False

Question 13

The cost of a new product is no longer an outcome of the product design process; rather, it is an input to the process.

Accepted Answer

A) True 
 B)False

Question 14

The Consumer Price Index (CPI) tracks material price movements from quarter to quarter, is scaled to a base year (1988), and tracks the percentage increase in material commodity prices based on a sample of industrial purchasers.

Accepted Answer

A) True 
 B)False

Question 15

In TCO, _____ includes all costs associated with bringing the product, service, or capital equipment to the customer's location.

Accepted Answer

A)  purchase price 
B)  opportunity costs 
C)  acquisition costs 
D)  usage costs 
E)  end of life costs 
A)  purchase price 
B)  opportunity costs 
C)  acquisition costs 
D)  usage costs 
E)  end of life costs

Question 16

Which of the following is not an item or product that is an appropriate candidate for a cost-based pricing approach?

Accepted Answer

A)  An item in which the seller contributes high added value through direct or indirect labor and specialized expertise. 
B)  A complex item customized to specific requirements. 
C)  A product requiring a conversion from raw material through value-added designs. 
D)  A product requiring supplier-provided design and engineering support. 
E)  Commodity-like items. 
A)  An item in which the seller contributes high added value through direct or indirect labor and specialized expertise. 
B)  A complex item customized to specific requirements. 
C)  A product requiring a conversion from raw material through value-added designs. 
D)  A product requiring supplier-provided design and engineering support. 
E)  Commodity-like items.

Question 17

In setting target prices and target costs, the new-product development team should bear in mind the cardinal rule of target costing: the target cost can never be violated.

Accepted Answer

A) True 
 B)False

Question 18

When supply exceeds demand, a buyer's market exists, and prices generally move downward.

Accepted Answer

A) True 
 B)False

Question 19

Purchasers impact price at the time they set the specifications for the product or service.

Accepted Answer

A) True 
 B)False

Question 20

The _____ is an approach to estimating the different components that make up the supplier's per unit price per unit of product or service, i.e., what the product or service should cost in a theoretical world.

Accepted Answer

A)  market skimming model 
B)  make-buy analysis 
C)  competition pricing model 
D)  rate-of-return model 
E)  Should-cost model 
A)  market skimming model 
B)  make-buy analysis 
C)  competition pricing model 
D)  rate-of-return model 
E)  Should-cost model

With _____, a product's allowable cost is strictly a function of what a market segment is willing to pay less the profit goals for the product.

The value of money spent any time in the future does not depend on the organization's cost of capital.

Which of the following is not one of the categories of products in the strategic cost management matrix?

The market-share model is also known as the penetration pricing model and is an aggressive pricing approach for efficient producers because price is a direct function of cost.

Which of the following statements regarding cost-savings sharing is false?

In the _____, the supplier analyzes the market to find the combination of price per unit and quantity of sales that maximizes its profit on the assumption that (1) lowering the price per unit will result in more units being sold, and (2) greater volume will spread the indirect cost over more units.

A should-cost model can lead the procurement manager to better understand elements of overhead, mark-ups on non-value-added costs, and other components that can undermine price inflation.

In the _____, the desired profit is added to the estimated costs.

_____ include(s) all costs incurred when a product, service, or capital equipment reaches the end of its useful life, net of amounts received from the sale of remaining product or the equipment (salvage value).

In the _____, pricing is based on the assumption that long-run profitability depends on the market share obtained by the supplier.

In TCO, _____ is the amount paid to the supplier for the product, service, or capital equipment.

A cost-based approach to supplier pricing is feasible when the seller contributes high added value to an item through direct or indirect labor and specialized expertise.

The cost of a new product is no longer an outcome of the product design process; rather, it is an input to the process.

The Consumer Price Index (CPI) tracks material price movements from quarter to quarter, is scaled to a base year (1988), and tracks the percentage increase in material commodity prices based on a sample of industrial purchasers.

In TCO, _____ includes all costs associated with bringing the product, service, or capital equipment to the customer's location.

Which of the following is not an item or product that is an appropriate candidate for a cost-based pricing approach?

In setting target prices and target costs, the new-product development team should bear in mind the cardinal rule of target costing: the target cost can never be violated.

When supply exceeds demand, a buyer's market exists, and prices generally move downward.

Purchasers impact price at the time they set the specifications for the product or service.

The _____ is an approach to estimating the different components that make up the supplier's per unit price per unit of product or service, i.e., what the product or service should cost in a theoretical world.

Introduction to Purchasing and Supply Chain Management

The Purchasing Process

Purchasing Policy and Procedures

Supply Management Integration for Competitive Advantage

Purchasing and Supply Management Organization

Category Strategy Development

Supplier Evaluation and Selection

Supplier Quality Management

Supplier Management and Development: Creating a World-Class Supply Base

Worldwide Sourcing

Purchasing and Supply Chain Analysis: Tools and Techniques

Negotiation and Conflict Management

Contract Management

Purchasing Law and Ethics

Lean Supply Chain Management

Purchasing Services

Supply Chain Information Systems and Electronic Sourcing

Performance Measurement and Evaluation

Purchasing and Supply Strategy Trends

Filters

Exam 11: Strategic Cost Management

With _____, a product's allowable cost is strictly a function of what a market segment is willing to pay less the profit goals for the product.

The value of money spent any time in the future does not depend on the organization's cost of capital.

Which of the following is not one of the categories of products in the strategic cost management matrix?

The market-share model is also known as the penetration pricing model and is an aggressive pricing approach for efficient producers because price is a direct function of cost.

Which of the following statements regarding cost-savings sharing is false?

In the _____, the supplier analyzes the market to find the combination of price per unit and quantity of sales that maximizes its profit on the assumption that (1) lowering the price per unit will result in more units being sold, and (2) greater volume will spread the indirect cost over more units.

A should-cost model can lead the procurement manager to better understand elements of overhead, mark-ups on non-value-added costs, and other components that can undermine price inflation.

In the _____, the desired profit is added to the estimated costs.

_____ include(s) all costs incurred when a product, service, or capital equipment reaches the end of its useful life, net of amounts received from the sale of remaining product or the equipment (salvage value).

In the _____, pricing is based on the assumption that long-run profitability depends on the market share obtained by the supplier.

In TCO, _____ is the amount paid to the supplier for the product, service, or capital equipment.

A cost-based approach to supplier pricing is feasible when the seller contributes high added value to an item through direct or indirect labor and specialized expertise.

The cost of a new product is no longer an outcome of the product design process; rather, it is an input to the process.

The Consumer Price Index (CPI) tracks material price movements from quarter to quarter, is scaled to a base year (1988), and tracks the percentage increase in material commodity prices based on a sample of industrial purchasers.

In TCO, _____ includes all costs associated with bringing the product, service, or capital equipment to the customer's location.

Which of the following is not an item or product that is an appropriate candidate for a cost-based pricing approach?

In setting target prices and target costs, the new-product development team should bear in mind the cardinal rule of target costing: the target cost can never be violated.

When supply exceeds demand, a buyer's market exists, and prices generally move downward.

Purchasers impact price at the time they set the specifications for the product or service.

The _____ is an approach to estimating the different components that make up the supplier's per unit price per unit of product or service, i.e., what the product or service should cost in a theoretical world.

Introduction to Purchasing and Supply Chain Management

The Purchasing Process

Purchasing Policy and Procedures

Supply Management Integration for Competitive Advantage

Purchasing and Supply Management Organization

Category Strategy Development

Supplier Evaluation and Selection

Supplier Quality Management

Supplier Management and Development: Creating a World-Class Supply Base

Worldwide Sourcing

Purchasing and Supply Chain Analysis: Tools and Techniques

Negotiation and Conflict Management

Contract Management

Purchasing Law and Ethics

Lean Supply Chain Management

Purchasing Services

Supply Chain Information Systems and Electronic Sourcing

Performance Measurement and Evaluation

Purchasing and Supply Strategy Trends

Filters