MGSC 487 Exam 2 Questions With
Correct Answers
`Fair and Just Price - CORRECT ANSWER✔✔-- Lowest price that ensures
| | | | | | | | | | |
a continuous supply of proper quality where and when needed
| | | | | | | | |
- Accuracy in making the judgement depends on:
| | | | | | | |
-Past Experience | |
-Knowledge of production processes | | | |
-Costs of production process
| | |
-Logistics Costs |
Making sure that the price is low but also that the supplier is making a
| | | | | | | | | | | | | | |
decent profit |
Continuous Supply - CORRECT ANSWER✔✔--Only possible in the long
| | | | | | | | |
run from a supplier who is making reasonable profit
| | | | | | | |
- Suppliers totals costs must be covered by total sales in the long run
| | | | | | | | | | | | |
,Meaning of Cost- Direct - CORRECT ANSWER✔✔-- Can be specifically
| | | | | | | | | |
and accurately assigned to a given unit of production or a specific
| | | | | | | | | | | |
identifiable task performed by a service provider.
| | | | | | |
-Direct labor costs are the wages paid to the professionals and fees paid
| | | | | | | | | | | | |
to contract or freelance labor to deliver the service
| | | | | | | |
Meaning of Cost- Indirect - CORRECT ANSWER✔✔--Incurred in the
| | | | | | | | |
operation of a production plant or process or service organization, but
| | | | | | | | | | |
normally cannot be related directly to any given unit of production or
| | | | | | | | | | | |
service provided. |
Ex: Rent, property taxes, machine depreciation, expenses of general
| | | | | | | | |
supervisors, data processing power, heat, and light | | | | | |
-Often referred to as overhead- May be fixed or variable
| | | | | | | | |
Classification of Costs- Variable - CORRECT ANSWER✔✔-- Most are
| | | | | | | | |
direct costs because they vary directly to any given unit of production or
| | | | | | | | | | | |
service provided
| |
Classification of Costs- Semi Variable - CORRECT ANSWER✔✔-- May
| | | | | | | | |
vary with the number of units produced but are partly variable and
| | | | | | | | | | | |
partly fixed. | |
,Ex: more heat, light, and power are used when a plant is operating at
| | | | | | | | | | | | | |
90% capacity than when operating at 50% capacity
| | | | | | |
Classification of Costs- Fixed - CORRECT ANSWER✔✔-- Generally remain
| | | | | | | |
the same regardless of the number of units produced
| | | | | | | | |
Ex: real estate taxes will be the same for a given period of time
| | | | | | | | | | | | | |
regardless of whether one unit or 100,000 units are produced
| | | | | | | | |
Establishing Price- Cost Approach - CORRECT ANSWER✔✔-- Price is set
| | | | | | | | | |
greater than direct costs, allowing for sufficient contribution to cover
| | | | | | | | | |
indirect costs and overhead, and leaving a margin for profit
| | | | | | | | |
- Provides the purchaser with opportunities to seek lower-cost
| | | | | | | | |
suppliers, to suggest lower-cost manufacturing or service alternatives,
| | | | | | | |
and to question the size of the margin over direct costs
| | | | | | | | | |
- Negotiation as well as cost-analysis techniques is a useful tool
| | | | | | | | | |
Establishing Price- Market Approach - CORRECT ANSWER✔✔-- Prices
| | | | | | | |
are set in the marketplace and may not be directly related to cost.
| | | | | | | | | | | | |
, | >Follows supply and demand | | | |
| model (Ex: Oil and gold). If
| | | | | |
| demand is high relative to | | | | |
| supply, then prices are | | | |
| expected to rise | |
| >If price can't be budged, its
| | | | | |
| still possible to select suppliers
| | | | |
| with nonprice incentives, like
| | | |
| excellent service, delivery, | | |
| early warning of price changes
| | | |
| >Negotiation here centers on | | | |
| items other than price
| | | |
- Find a way around it:
| | | | | |
| >Select suppliers who have | | | |
| other incentives |
| >Substitute "like" materials | | |
| (aluminum instead of copper | | |
| >Outsource (or insource) | |
| >Establish long term contracts: | | | |
| forward buying |
Correct Answers
`Fair and Just Price - CORRECT ANSWER✔✔-- Lowest price that ensures
| | | | | | | | | | |
a continuous supply of proper quality where and when needed
| | | | | | | | |
- Accuracy in making the judgement depends on:
| | | | | | | |
-Past Experience | |
-Knowledge of production processes | | | |
-Costs of production process
| | |
-Logistics Costs |
Making sure that the price is low but also that the supplier is making a
| | | | | | | | | | | | | | |
decent profit |
Continuous Supply - CORRECT ANSWER✔✔--Only possible in the long
| | | | | | | | |
run from a supplier who is making reasonable profit
| | | | | | | |
- Suppliers totals costs must be covered by total sales in the long run
| | | | | | | | | | | | |
,Meaning of Cost- Direct - CORRECT ANSWER✔✔-- Can be specifically
| | | | | | | | | |
and accurately assigned to a given unit of production or a specific
| | | | | | | | | | | |
identifiable task performed by a service provider.
| | | | | | |
-Direct labor costs are the wages paid to the professionals and fees paid
| | | | | | | | | | | | |
to contract or freelance labor to deliver the service
| | | | | | | |
Meaning of Cost- Indirect - CORRECT ANSWER✔✔--Incurred in the
| | | | | | | | |
operation of a production plant or process or service organization, but
| | | | | | | | | | |
normally cannot be related directly to any given unit of production or
| | | | | | | | | | | |
service provided. |
Ex: Rent, property taxes, machine depreciation, expenses of general
| | | | | | | | |
supervisors, data processing power, heat, and light | | | | | |
-Often referred to as overhead- May be fixed or variable
| | | | | | | | |
Classification of Costs- Variable - CORRECT ANSWER✔✔-- Most are
| | | | | | | | |
direct costs because they vary directly to any given unit of production or
| | | | | | | | | | | |
service provided
| |
Classification of Costs- Semi Variable - CORRECT ANSWER✔✔-- May
| | | | | | | | |
vary with the number of units produced but are partly variable and
| | | | | | | | | | | |
partly fixed. | |
,Ex: more heat, light, and power are used when a plant is operating at
| | | | | | | | | | | | | |
90% capacity than when operating at 50% capacity
| | | | | | |
Classification of Costs- Fixed - CORRECT ANSWER✔✔-- Generally remain
| | | | | | | |
the same regardless of the number of units produced
| | | | | | | | |
Ex: real estate taxes will be the same for a given period of time
| | | | | | | | | | | | | |
regardless of whether one unit or 100,000 units are produced
| | | | | | | | |
Establishing Price- Cost Approach - CORRECT ANSWER✔✔-- Price is set
| | | | | | | | | |
greater than direct costs, allowing for sufficient contribution to cover
| | | | | | | | | |
indirect costs and overhead, and leaving a margin for profit
| | | | | | | | |
- Provides the purchaser with opportunities to seek lower-cost
| | | | | | | | |
suppliers, to suggest lower-cost manufacturing or service alternatives,
| | | | | | | |
and to question the size of the margin over direct costs
| | | | | | | | | |
- Negotiation as well as cost-analysis techniques is a useful tool
| | | | | | | | | |
Establishing Price- Market Approach - CORRECT ANSWER✔✔-- Prices
| | | | | | | |
are set in the marketplace and may not be directly related to cost.
| | | | | | | | | | | | |
, | >Follows supply and demand | | | |
| model (Ex: Oil and gold). If
| | | | | |
| demand is high relative to | | | | |
| supply, then prices are | | | |
| expected to rise | |
| >If price can't be budged, its
| | | | | |
| still possible to select suppliers
| | | | |
| with nonprice incentives, like
| | | |
| excellent service, delivery, | | |
| early warning of price changes
| | | |
| >Negotiation here centers on | | | |
| items other than price
| | | |
- Find a way around it:
| | | | | |
| >Select suppliers who have | | | |
| other incentives |
| >Substitute "like" materials | | |
| (aluminum instead of copper | | |
| >Outsource (or insource) | |
| >Establish long term contracts: | | | |
| forward buying |
