Deck 11: Cost Management

Question 1

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.

Answer 1

True

Question 2

When cost analysis is applied to a supplier's price, the buyer focuses on identifying an overall cost reduction target with little insight into specific cost elements.

Answer 2

False

Question 3

Activity based costing attempts to:

A) correct the distortions built into product costing by the way that direct costs are allocated.
B) correct the distortions built into product costing by the way that the learning curve is applied to direct labor costs.
C) turn indirect costs into direct costs by tracking the cost drivers behind indirect costs.
D) turn direct costs into indirect costs by tracking the cost drivers behind direct costs.
E) introduce a new way to allocate direct costs that more accurately captures labor and material usage.

Answer 3

C

Question 4

Target pricing:

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

Question 5

Activity based costing primarily is an accounting process that has little practical value for buyers.

Question 6

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

Question 7

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

A) tooling costs.
B) profit rates.
C) overhead costs.
D) direct labor costs.
E) direct material costs.

Question 8

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

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

Question 9

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.

Question 10

Target pricing may result in companywide cost reductions in:

A) design to cost.
B) manufacture to cost.
C) purchase to cost.
D) a and b.
E) a, b, and c

Question 11

When estimating the costs of a manufacturing supplier:

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

Question 12

In portfolio analysis, the goal when purchasing leverage items is:

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

Question 13

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

A) decide if negotiation makes sense.
B) establish negotiation points.
C) avoid setting unrealistic expectations.
D) b and c
E) a, b, and c

Question 14

Educating suppliers about the buying organization's operations is an example of a transaction cost in the total cost of ownership model.

Question 15

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

A) strategic cost management.
B) supply chain management.
C) total cost management.
D) profit leverage effect.
E) activity based costing.

Question 16

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.

Question 17

A unique cost model is one that applies to a variety of common supply situations.

Question 18

In negotiation, a fact is any piece of information on which the buyer believes he or she can negotiate an agreement with the supplier.

Question 19

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

Question 20

Sources of sustainable competitive advantage include:

A) product differentiation where customers have low price sensitivity),
B) low cost where customers have high price sensitivity),
C) a combination of product differentiation and cost-leadership.
D) a, b and c i. none of the above