Question 1

Which is not one of the criteria given in the textbook to determine whether using an FFP type contract is feasible?

Accepted Answer

A)  Specifications are well defined 
B)  Cost risk is high 
C)  Schedule risk is low 
D)  Technical risk is low 
E)  Competition has established pricing 
A)  Specifications are well defined 
B)  Cost risk is high 
C)  Schedule risk is low 
D)  Technical risk is low 
E)  Competition has established pricing B

Question 2

Three general types of contract compensation arrangements were presented in the textbook: fixed price contracts,buyer's favor contracts and supplier's favor contracts.

Accepted Answer

A) True 
 B)False  False

Question 3

A firm fixed price (FFP)contract is an agreement to pay a specified price when the items (services)specified by the contract have been delivered (completed)and accepted.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following is not typical of a cost without fee arrangement?

Accepted Answer

A)  Used primarily by nonprofit institutions 
B)  Used for research work 
C)  The objective is to only make a small profit 
D)  Institutions generally recover all overhead costs when using this type of contract 
E)  In recent years, high-technology firms have increased their use of this contract type 
A)  Used primarily by nonprofit institutions 
B)  Used for research work 
C)  The objective is to only make a small profit 
D)  Institutions generally recover all overhead costs when using this type of contract 
E)  In recent years, high-technology firms have increased their use of this contract type

Question 5

Three general types of contract compensation arrangements were presented in the textbook: fixed price contracts,incentive contracts and cost-type contracts.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is generally not a consideration that should impact the type of contract supply management decides to choose?

Accepted Answer

A)  Unstable labor conditions 
B)  Enforcement problems 
C)  Unstable market conditions 
D)  Improvement in production is required 
E)  Complexity of product or service 
A)  Unstable labor conditions 
B)  Enforcement problems 
C)  Unstable market conditions 
D)  Improvement in production is required 
E)  Complexity of product or service

Question 7

Which of the following is not a cost type arrangement?

Accepted Answer

A)  Cost reimbursement 
B)  Cost without fee 
C)  Cost sharing 
D)  Time and materials 
E)  Materials and machine 
A)  Cost reimbursement 
B)  Cost without fee 
C)  Cost sharing 
D)  Time and materials 
E)  Materials and machine

Question 8

Which of the following is not typical of a CPFF arrangement?

Accepted Answer

A)  Buying firm pays a fixed fee and all costs beyond fee 
B)  Fee is for an unlimited scope of work 
C)  Supplier has no incentive to control costs 
D)  Characterized by low supplier profit 
E)  A total liability limit is usually established 
A)  Buying firm pays a fixed fee and all costs beyond fee 
B)  Fee is for an unlimited scope of work 
C)  Supplier has no incentive to control costs 
D)  Characterized by low supplier profit 
E)  A total liability limit is usually established

Question 9

Which is not one of the rules given in the textbook for selecting indexes for price adjustment clauses?

Accepted Answer

A)  Use broad indexes 
B)  Develop a weighted index for materials in a product 
C)  Select labor rate indexes by type and location 
D)  Define energy indexes by fuel type and location 
E)  Analyze the past history of each index versus actual price change of the item being indexed 
A)  Use broad indexes 
B)  Develop a weighted index for materials in a product 
C)  Select labor rate indexes by type and location 
D)  Define energy indexes by fuel type and location 
E)  Analyze the past history of each index versus actual price change of the item being indexed

Question 10

The target cost is the cost outcome both buyer and supplier feel is the most likely outcome.

Accepted Answer

A) True 
 B)False

Question 11

Contract schedule risk is the risk associated with possible schedule slippages,but not the risk of material and labor cost increases during the length of the contract.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not a criterion in favor of using cost-type arrangements?

Accepted Answer

A)  Research and development increases technical risk 
B)  Project completion is in doubt 
C)  Product specifications are incomplete 
D)  Delivery times are certain 
E)  High-dollar, highly uncertain procurements are involved 
A)  Research and development increases technical risk 
B)  Project completion is in doubt 
C)  Product specifications are incomplete 
D)  Delivery times are certain 
E)  High-dollar, highly uncertain procurements are involved

Question 13

Which of the following is generally not a consideration that should impact the type of contract supply management decides to choose?

Accepted Answer

A)  Improvement in production is required 
B)  Complexity of product or service 
C)  Product or service requires development 
D)  Desire of marketing to engage in reciprocity 
E)  Design is not completed or may change 
A)  Improvement in production is required 
B)  Complexity of product or service 
C)  Product or service requires development 
D)  Desire of marketing to engage in reciprocity 
E)  Design is not completed or may change

Question 14

The target profit is an amount the buyer hopes to make.

Accepted Answer

A) True 
 B)False

Question 15

FPEPA contracts are used to recognize economic contingencies,such as unstable labor or market conditions.

Accepted Answer

A) True 
 B)False

Question 16

A supplier that is under an FFP contract may end up losing money and request relief.Which of the following reasons is why the customer will allow changing the price?

Accepted Answer

A)  Customer did not contributed to the loss 
B)  Customer does not need the items 
C)  Customer assumes no other suppliers are available 
D)  Supplier has facilities that are not unique 
E)  There is plenty of time to find a new supplier 
A)  Customer did not contributed to the loss 
B)  Customer does not need the items 
C)  Customer assumes no other suppliers are available 
D)  Supplier has facilities that are not unique 
E)  There is plenty of time to find a new supplier

Question 17

Which of the following is not typical of a CPAF arrangement?

Accepted Answer

A)  The award fee is a pool of money established by the buyer 
B)  The award fee is a pool of money to reward the supplier in meeting the buyer's stated needs 
C)  Receipt of the fee is based on the buying firm's objective evaluation 
D)  Receipt of the fee is based on the buying firm's subjective evaluation 
E)  The arrangement works as a flexible tool 
A)  The award fee is a pool of money established by the buyer 
B)  The award fee is a pool of money to reward the supplier in meeting the buyer's stated needs 
C)  Receipt of the fee is based on the buying firm's objective evaluation 
D)  Receipt of the fee is based on the buying firm's subjective evaluation 
E)  The arrangement works as a flexible tool

Question 18

FPEPA is not similar to an FFP contract.

Accepted Answer

A) True 
 B)False

Question 19

FPEPA is an FFP contract that includes economic price adjustment clauses such as escalator clauses are for price increases and de-escalator clauses are for price decreases.

Accepted Answer

A) True 
 B)False

Question 20

Cost Plus Incentive Fee arrangements combine the incentive arrangement and the FFP arrangement.

Accepted Answer

A) True 
 B)False

Exam 15: Methods of Compensation

Which is not one of the criteria given in the textbook to determine whether using an FFP type contract is feasible?

Three general types of contract compensation arrangements were presented in the textbook: fixed price contracts,buyer's favor contracts and supplier's favor contracts.

A firm fixed price (FFP)contract is an agreement to pay a specified price when the items (services)specified by the contract have been delivered (completed)and accepted.

Which of the following is not typical of a cost without fee arrangement?

Three general types of contract compensation arrangements were presented in the textbook: fixed price contracts,incentive contracts and cost-type contracts.

Which of the following is generally not a consideration that should impact the type of contract supply management decides to choose?

Which of the following is not a cost type arrangement?

Which of the following is not typical of a CPFF arrangement?

Which is not one of the rules given in the textbook for selecting indexes for price adjustment clauses?

The target cost is the cost outcome both buyer and supplier feel is the most likely outcome.

Contract schedule risk is the risk associated with possible schedule slippages,but not the risk of material and labor cost increases during the length of the contract.

Which of the following is not a criterion in favor of using cost-type arrangements?

Which of the following is generally not a consideration that should impact the type of contract supply management decides to choose?

The target profit is an amount the buyer hopes to make.

FPEPA contracts are used to recognize economic contingencies,such as unstable labor or market conditions.

A supplier that is under an FFP contract may end up losing money and request relief.Which of the following reasons is why the customer will allow changing the price?

Which of the following is not typical of a CPAF arrangement?

FPEPA is not similar to an FFP contract.

FPEPA is an FFP contract that includes economic price adjustment clauses such as escalator clauses are for price increases and de-escalator clauses are for price decreases.

Cost Plus Incentive Fee arrangements combine the incentive arrangement and the FFP arrangement.

The Progression to Professional Supply Management

Organizational Issues

Supply Management: an Organization Spanning Activity

A Portfolio of Relationships

New Product Development

Purchasing Descriptions and Specifications

Managing for Quality

The Procurement of Equipment

Purchasing Services

Outsourcing

Sourcing

Global Supply Management

Total Cost of Ownership

Price and Cost Analysis

Negotiation

Contract Formation and Legal Issues

Contact and Relationship Management

Ethics and Social Responsibilities

Production and Inventory Control

Demand Management and Logistics

Implementing Value Network Management

Filters