Deck 11: Cost Management

Question 1

Best practice in managing supply cost savings includes a formal process to validate the savings with finance/accounting and evaluate potential changes to the budget.

Answer 1

True

Question 2

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

Answer 2

False

Question 3

The position of strength assessment focuses exclusively on the other party in the negotiation.

Answer 3

False

Question 4

Life cycle costing (LCC):

A)includes all relevant costs expected in the first three years of ownership.
B)focuses on purchase price that is typically the highest percentage of LCC.
C)shows the phases of product evolution from growth to maturity.
D)may include costs that are 10-15 years in the future and highly uncertain.
E)can be applied to all types of purchases except capital acquisitions.

Question 5

After identifying and implementing supply cost savings,the supply manager should:

A)validate the savings with finance/accounting.
B)evaluate potential implications for changes to the budget.
C)notify the budget holder so he or she can use the savings for other expenses or projects.
D)validate the savings with finance/accounting and evaluate potential implications for changes to the budget.
E)validate the savings with finance/accounting,evaluate potential implications for changes to the budget and notify the budget holder so he or she can use the savings for other expenses or projects.

Question 6

When planning a negotiation strategy,if the estimated range of acceptable results for both buyer and seller indicates there is no zone of overlap,the negotiator must determine if the gap can be closed.

Question 7

Target costing starts with:

A)the selling price of an organization's end product minus the operating profit to establish the target cost.
B)the supplier's price,and works to determine the selling price of the buying organization's end product or service.
C)the supplier's price,and works to determine the supplier's true cost structure.
D)the buyer's lowest reasonable price target,and works to a negotiated price agreed on by the buyer and the supplier.
E)the selling price of an organization's end product minus actual manufacturing,overhead,and materials costs to determine operating profit.

Question 8

When estimating the cost structure of a manufacturing supplier:

A)material costs are difficult to estimate.
B)direct labor costs are the easiest costs to estimate.
C)prices of raw materials are not commonly accessible.
D)labor rates are typically uniform across different plant locations.
E)equipment depreciation is typically the largest cost element in overhead.

Question 9

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

A)divide the spend for the item or service among multiple suppliers.
B)avoid,eliminate or reduce costs in supplier switching costs.
C)avoid,eliminate or reduce costs in buyer and supplier cost structures.
D)avoid,eliminate or reduce costs in the supplier's cost structure.
E)avoid,eliminate or reduce costs in the buyer's cost structure.

Question 10

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

A)bottleneck items.
B)strategic items.
C)leverage/commodity items.
D)noncritical/routine items.
E)bottleneck items and strategic items.

Question 11

Cost management for services:

A)is confined to internal demand analysis and consumption management.
B)is confined to supplier cost structure analysis.
C)includes demand management and supplier cost structure analysis.
D)focuses primarily on better design of the service.
E)is only possible when the service is highly tangible.

Question 12

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

Question 13

Portfolio analysis is:

A)a method of multiple sourcing.
B)a method of identifying substitute materials.
C)the categorization of spend map based on the risks to acquire in the marketplace and value.
D)a method of multiple sourcing and the categorization of spend map based on the risks to acquire in the marketplace and value.
E)a method of multiple sourcing,a method of identifying substitute materials and the categorization of spend map based on the risks to acquire in the marketplace and value.

Question 14

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

A)assure quality at expected levels.
B)reduce or eliminate customization.
C)assure lowest total cost of ownership.
D)minimize acquisition time and cost.
E)minimize price per unit.

Question 15

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

A)activity-based costing.
B)the learning curve.
C)total cost of ownership.
D)activity-based costing and total cost of ownership.
E)activity-based costing,the learning curve and total cost of ownership.

Question 16

Purchasers can use activity-based costing to:

A)eliminate nonvalue-adding activities.
B)reduce activity occurrences.
C)reduce the cost driver rate.
D)eliminate nonvalue-adding activities and reduce the cost driver rate.
E)eliminate nonvalue-adding activities,reduce activity occurrences and reduce the cost driver rate.

Question 17

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

A)identifies a cost reduction target with no insight into specific cost elements.
B)relies on supplier information about areas where it can cut costs.
C)recognizes that little cost data is available for most cost elements.
D)identifies and analyzes each cost element for cost reduction opportunities.
E)cannot expect any assistance from the supplier.

Question 18

Purchases categorized as leverage items in portfolio analysis have the following characteristic(s):

A)standard specification or commodity-type items.
B)switching suppliers is difficult.
C)supplier technology is important.
D)standard specification or commodity-type items and supplier technology is important.
E)standard specification or commodity-type items,switching suppliers is difficult and supplier technology is important.

Question 19

Common method(s)of analyzing total costs of ownership (TCO)include:

A)standard cost models.
B)unique cost models.
C)segregating costs on the basis of pretransaction,transaction and post-transaction costs.
D)standard cost models and segregating costs on the basis of pretransaction,transaction and post-transaction costs.
E)standard cost models,unique cost models and segregating costs on the basis of pretransaction,transaction and post-transaction costs.

Question 20

The goal of value engineering and value analysis is to:

A)perform a function at the same or an improved level while reducing costs.
B)analyze the value-added from engineering services and production.
C)analyze functions to satisfy all needed quality requirements at any cost.
D)define value of a function in technically accurate and precise language.
E)perform a function at an improved level at the same cost.

Question 21

Besides price determination,there are very few areas in supply management where negotiation is a useful and cost-effective tool.

Question 22

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.

Question 23

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

Question 24

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

Question 25

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.

Question 26

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

Question 27

All negotiations have an economic as well as a psychological dimension.

Question 28

An externally focused process of analyzing costs in terms of the overall supply chain is called strategic cost management.

Question 29

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

Question 30

In value engineering and value analysis,value can be expressed as: Price ÷ Cost.