SCM 371 EXAM 3 QUESTIONS WITH VERIFIED
ACCURATE ANSWERS
Achieve financial goals, fit realities of market, support positioning strategy - Answers -
Well Chosen Price
Enhance negotiating effectiveness, evaluate supplier selection, improve price and cost,
drive continuous improvement - Answers - Objectives of Purchasing Department
Market Based Pricing - Answers - Compare suppliers' quoted prices
price lists, quotes, competitive bidding, negotiations, other buyers, trade journals -
Answers - Possible Sources for market based pricing
Cost Based Pricing - Answers - analyzing each cost element composed within the price,
such as materials, labor, overhead
Engineering estimates, historical experience, public supplier information, industry data
(RMA, US Census Bureau, Ward's Industrial Directory) - Answers - Possible sources for
cost based pricing
Quantity Discount - Answers - Discount for large volume
Penetration pricing - Answers - offers a low price to penetrate market; low ball
Market Skimming - Answers - charge high initial price and lower over time
Promotional Pricing - Answers - lowering price to attract customers to enhance sales of
a product line
Competition Pricing - Answers - setting price based on what competition is charging
(dynamic pricing)
Cash Discounts - Answers - discount if paying bill early
Target Costing - Answers - buyer works with supplier to design a product to be sold for
a specific target price
Cost Plus Pricing - Answers - supplier adds % to product cost for profit
Rate of Return Pricing - Answers - Setting the price based on an equation that
computes the price that will result in a certain level of planned profit with the sale of a
certain amount of items
, Should Cost Pricing - Answers - Estimate of the supplier's cost when the supplier is
unable or refuses to provide cost data
Calculate a fair price, compare with other suppliers, open up dialog, seek possible
improvements - Answers - Why use Should Cost Model?
Understand problem, collect data, analyze, adjust, compare, negotiate - Answers -
Should Cost Process
Supplier is representative of industry average, DM estimate is accurate, industry has not
changed drastically - Answers - Should Cost Assumptions
Educate ourselves on what we are buying, understand user requirements, understand
other negotiation team, determine what we want from negotiation - Answers - What to
do before negotiating
Parties are capable, subject mater is legal, mutual consideration, agreement is reached
by offer and acceptance - Answers - Requirements of a contract
Intent, Communication, Specific Identification - Answers - 3 components of an offer
Offer - Answers - To present something to someone for them to accept or reject
Counteroffer - Answers - Revision to the proposal; a new offer
Boilerplate - Answers - the legal terms that are included in documents (fine print)
Included to protect the party that submits the document
An offer, not a contract. Becomes a contract when accepted - Answers - What is a
purchase order?
Lapse, Reject, Revoke, Accept - Answers - Outcomes of an Offer
nature of the product, variability of market price, historical dealings, industry norms -
Answers - Time Limits of an Offer Based On:
Principal - Answers - Organization
Agent - Answers - Acts on behalf of the principal
name of principal is on the document, parties are aware agent is acting for principal,
relationship is on the document, agent acts within scope of authority - Answers - Agent
has no personal liability if:
ACCURATE ANSWERS
Achieve financial goals, fit realities of market, support positioning strategy - Answers -
Well Chosen Price
Enhance negotiating effectiveness, evaluate supplier selection, improve price and cost,
drive continuous improvement - Answers - Objectives of Purchasing Department
Market Based Pricing - Answers - Compare suppliers' quoted prices
price lists, quotes, competitive bidding, negotiations, other buyers, trade journals -
Answers - Possible Sources for market based pricing
Cost Based Pricing - Answers - analyzing each cost element composed within the price,
such as materials, labor, overhead
Engineering estimates, historical experience, public supplier information, industry data
(RMA, US Census Bureau, Ward's Industrial Directory) - Answers - Possible sources for
cost based pricing
Quantity Discount - Answers - Discount for large volume
Penetration pricing - Answers - offers a low price to penetrate market; low ball
Market Skimming - Answers - charge high initial price and lower over time
Promotional Pricing - Answers - lowering price to attract customers to enhance sales of
a product line
Competition Pricing - Answers - setting price based on what competition is charging
(dynamic pricing)
Cash Discounts - Answers - discount if paying bill early
Target Costing - Answers - buyer works with supplier to design a product to be sold for
a specific target price
Cost Plus Pricing - Answers - supplier adds % to product cost for profit
Rate of Return Pricing - Answers - Setting the price based on an equation that
computes the price that will result in a certain level of planned profit with the sale of a
certain amount of items
, Should Cost Pricing - Answers - Estimate of the supplier's cost when the supplier is
unable or refuses to provide cost data
Calculate a fair price, compare with other suppliers, open up dialog, seek possible
improvements - Answers - Why use Should Cost Model?
Understand problem, collect data, analyze, adjust, compare, negotiate - Answers -
Should Cost Process
Supplier is representative of industry average, DM estimate is accurate, industry has not
changed drastically - Answers - Should Cost Assumptions
Educate ourselves on what we are buying, understand user requirements, understand
other negotiation team, determine what we want from negotiation - Answers - What to
do before negotiating
Parties are capable, subject mater is legal, mutual consideration, agreement is reached
by offer and acceptance - Answers - Requirements of a contract
Intent, Communication, Specific Identification - Answers - 3 components of an offer
Offer - Answers - To present something to someone for them to accept or reject
Counteroffer - Answers - Revision to the proposal; a new offer
Boilerplate - Answers - the legal terms that are included in documents (fine print)
Included to protect the party that submits the document
An offer, not a contract. Becomes a contract when accepted - Answers - What is a
purchase order?
Lapse, Reject, Revoke, Accept - Answers - Outcomes of an Offer
nature of the product, variability of market price, historical dealings, industry norms -
Answers - Time Limits of an Offer Based On:
Principal - Answers - Organization
Agent - Answers - Acts on behalf of the principal
name of principal is on the document, parties are aware agent is acting for principal,
relationship is on the document, agent acts within scope of authority - Answers - Agent
has no personal liability if:
