MGSC 487- EXAM 2 QUESTIONS AND ANSWERS |
LATEST UPDATE
What is fair price? - Answers - Lowest price that assures continuous supply of proper
quality where and when it is needed
Continuous supply is only possible: - Answers - in the long run only from a supplier who
is making a reasonable profit
Accuracy in making the judgment for fair and just price depends on: - Answers - Past
experience, knowledge of production processes, costs of production processes,
logistics costs
Direct costs - Answers - Can be specifically and accurately assigned to a given unit of
production
Indirect costs - Answers - incurred in the operation of a production plant or process, but
normally cannot be related to any given unit of production. Often referred to as
'overhead' and includes rent, machine depreciation, and general supervisors
Semi variable costs - Answers - may vary with the number of units products are partly
variable and partly fixed
Fixed Costs - Answers - remain the same regardless of the number of units products
EX. Real estate tax
Costs - Answers - dollars and cents per unit based on an average cost of raw material
over a period of time, direct labor costs, and estimated volume of production over a
period of time on which the distribution of overhead is based
Cost Approach - Answers - -Price is a certain amount over direct costs and allows
contribution to cover indirect costs and some profit
In Cost approach costs are classified as: - Answers - variable, semi variable, and fixed
What is Market Approach - Answers - Prices are set in the marketplace and are
expected to follow a supply and demand model
Market approach follows the - Answers - supply and demand model (supply high, cost
low)
(supply low, cost high)
, In market approach, how can you find a way to make your costs less? - Answers -
select suppliers who have other incentives, substitute "like" materials, outsource (or
insource), establish long-term contracts
How can government set prices? - Answers - production and import quotas
regulating buyer and seller behavior
set prices for government run organizations
What does Sherman Anti-Trust Act (1890) deem illegal? - Answers - price fixing
Price Fixing - Answers - the maintaining of prices at a certain level by agreement
between competing sellers.
What does the Robinson Patman Act (1936) deem illegal: - Answers - sell to different
customers at different prices
Exceptions to Robinson Patman Act - Answers - large purchase quantity, moving
obsolete material, meeting local competition
Government purchase must: - Answers - be made to the lowest responsible and
responsive bidder
Firm Fixed Price (FFP) - Answers - price set is not subject to change, under any
circumstances.
Cost Plus Fixed Fee (CPFF) - Answers - Occurs if item is experimental and
specifications are not firm, or if costs in the future cannot be predicted.
Cost No Fee (CNF) - Answers - Only the costs are returned. If the buyer can argue
persuasively that there will be enough subsidiary benefits to the supplier from doing a
particular job, then, the supplier, may be willing to do it provided the costs are
reimbursed.
Cost Plus Incentive Fee (CPIF) - Answers - Both buyer and seller agree on a target cost
figure, a fixed fee, and a formula under which any cost over or underruns are shared.
Price - Answers - what you agree to pay
Cost - Answers - what you will continue to pay (ex. maintenance, insurance,
accessories)
How can you Internally manage cost - Answers - process improvement, supply chain
efficiencies
How can you externally manage costs - Answers - negotiation, strategic cost
management
LATEST UPDATE
What is fair price? - Answers - Lowest price that assures continuous supply of proper
quality where and when it is needed
Continuous supply is only possible: - Answers - in the long run only from a supplier who
is making a reasonable profit
Accuracy in making the judgment for fair and just price depends on: - Answers - Past
experience, knowledge of production processes, costs of production processes,
logistics costs
Direct costs - Answers - Can be specifically and accurately assigned to a given unit of
production
Indirect costs - Answers - incurred in the operation of a production plant or process, but
normally cannot be related to any given unit of production. Often referred to as
'overhead' and includes rent, machine depreciation, and general supervisors
Semi variable costs - Answers - may vary with the number of units products are partly
variable and partly fixed
Fixed Costs - Answers - remain the same regardless of the number of units products
EX. Real estate tax
Costs - Answers - dollars and cents per unit based on an average cost of raw material
over a period of time, direct labor costs, and estimated volume of production over a
period of time on which the distribution of overhead is based
Cost Approach - Answers - -Price is a certain amount over direct costs and allows
contribution to cover indirect costs and some profit
In Cost approach costs are classified as: - Answers - variable, semi variable, and fixed
What is Market Approach - Answers - Prices are set in the marketplace and are
expected to follow a supply and demand model
Market approach follows the - Answers - supply and demand model (supply high, cost
low)
(supply low, cost high)
, In market approach, how can you find a way to make your costs less? - Answers -
select suppliers who have other incentives, substitute "like" materials, outsource (or
insource), establish long-term contracts
How can government set prices? - Answers - production and import quotas
regulating buyer and seller behavior
set prices for government run organizations
What does Sherman Anti-Trust Act (1890) deem illegal? - Answers - price fixing
Price Fixing - Answers - the maintaining of prices at a certain level by agreement
between competing sellers.
What does the Robinson Patman Act (1936) deem illegal: - Answers - sell to different
customers at different prices
Exceptions to Robinson Patman Act - Answers - large purchase quantity, moving
obsolete material, meeting local competition
Government purchase must: - Answers - be made to the lowest responsible and
responsive bidder
Firm Fixed Price (FFP) - Answers - price set is not subject to change, under any
circumstances.
Cost Plus Fixed Fee (CPFF) - Answers - Occurs if item is experimental and
specifications are not firm, or if costs in the future cannot be predicted.
Cost No Fee (CNF) - Answers - Only the costs are returned. If the buyer can argue
persuasively that there will be enough subsidiary benefits to the supplier from doing a
particular job, then, the supplier, may be willing to do it provided the costs are
reimbursed.
Cost Plus Incentive Fee (CPIF) - Answers - Both buyer and seller agree on a target cost
figure, a fixed fee, and a formula under which any cost over or underruns are shared.
Price - Answers - what you agree to pay
Cost - Answers - what you will continue to pay (ex. maintenance, insurance,
accessories)
How can you Internally manage cost - Answers - process improvement, supply chain
efficiencies
How can you externally manage costs - Answers - negotiation, strategic cost
management
