MGSC 487 – EXAM 2 EXAM MOST RECENT 2026 UPDATE WITH CORRECT
ACTUAL QUESTIONS AND CORRECTLY WELL DEFINED ANSWERS LATEST
ALREADY GRADED A+
What is fair price? - CORRECT ANSWER-Lowest price that assures continuous supply of proper
quality where and when it is needed
Continuous supply is only possible: - CORRECT ANSWER-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: - CORRECT ANSWER-Past
experience, knowledge of production processes, costs of production processes, logistics costs
Direct costs - CORRECT ANSWER-Can be specifically and accurately assigned to a given unit of
production
Indirect costs - CORRECT ANSWER-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 - CORRECT ANSWER-may vary with the number of units products are partly
variable and partly fixed
Fixed Costs - CORRECT ANSWER-remain the same regardless of the number of units products EX.
Real estate tax
Costs - CORRECT ANSWER-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 - CORRECT ANSWER--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: - CORRECT ANSWER-variable, semi variable, and fixed
What is Market Approach - CORRECT ANSWER-Prices are set in the marketplace and are expected to
follow a supply and demand model
Market approach follows the - CORRECT ANSWER-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? - CORRECT ANSWER-select
suppliers who have other incentives, substitute "like" materials, outsource (or insource), establish
long-term contracts
How can government set prices? - CORRECT ANSWER-production and import quotas
regulating buyer and seller behavior
set prices for government run organizations
What does Sherman Anti-Trust Act (1890) deem illegal? - CORRECT ANSWER-price fixing
Price Fixing - CORRECT ANSWER-the maintaining of prices at a certain level by agreement between
competing sellers.
What does the Robinson Patman Act (1936) deem illegal: - CORRECT ANSWER-sell to different
customers at different prices
Exceptions to Robinson Patman Act - CORRECT ANSWER-large purchase quantity, moving obsolete
material, meeting local competition
, Government purchase must: - CORRECT ANSWER-be made to the lowest responsible and responsive
bidder
Firm Fixed Price (FFP) - CORRECT ANSWER-price set is not subject to change, under any
circumstances.
Cost Plus Fixed Fee (CPFF) - CORRECT ANSWER-Occurs if item is experimental and specifications are
not firm, or if costs in the future cannot be predicted.
Cost No Fee (CNF) - CORRECT ANSWER-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) - CORRECT ANSWER-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 - CORRECT ANSWER-what you agree to pay
Cost - CORRECT ANSWER-what you will continue to pay (ex. maintenance, insurance, accessories)
How can you Internally manage cost - CORRECT ANSWER-process improvement, supply chain
efficiencies
How can you externally manage costs - CORRECT ANSWER-negotiation, strategic cost management
Strategic cost management - CORRECT ANSWER-Externally focused process of analyizing costs in
terms of overall value chain
Strategic cost management focuses on - CORRECT ANSWER-year over year cost savings
2 primary tools of Strategic cost mgmt: - CORRECT ANSWER-ABC Analysis
ACTUAL QUESTIONS AND CORRECTLY WELL DEFINED ANSWERS LATEST
ALREADY GRADED A+
What is fair price? - CORRECT ANSWER-Lowest price that assures continuous supply of proper
quality where and when it is needed
Continuous supply is only possible: - CORRECT ANSWER-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: - CORRECT ANSWER-Past
experience, knowledge of production processes, costs of production processes, logistics costs
Direct costs - CORRECT ANSWER-Can be specifically and accurately assigned to a given unit of
production
Indirect costs - CORRECT ANSWER-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 - CORRECT ANSWER-may vary with the number of units products are partly
variable and partly fixed
Fixed Costs - CORRECT ANSWER-remain the same regardless of the number of units products EX.
Real estate tax
Costs - CORRECT ANSWER-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 - CORRECT ANSWER--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: - CORRECT ANSWER-variable, semi variable, and fixed
What is Market Approach - CORRECT ANSWER-Prices are set in the marketplace and are expected to
follow a supply and demand model
Market approach follows the - CORRECT ANSWER-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? - CORRECT ANSWER-select
suppliers who have other incentives, substitute "like" materials, outsource (or insource), establish
long-term contracts
How can government set prices? - CORRECT ANSWER-production and import quotas
regulating buyer and seller behavior
set prices for government run organizations
What does Sherman Anti-Trust Act (1890) deem illegal? - CORRECT ANSWER-price fixing
Price Fixing - CORRECT ANSWER-the maintaining of prices at a certain level by agreement between
competing sellers.
What does the Robinson Patman Act (1936) deem illegal: - CORRECT ANSWER-sell to different
customers at different prices
Exceptions to Robinson Patman Act - CORRECT ANSWER-large purchase quantity, moving obsolete
material, meeting local competition
, Government purchase must: - CORRECT ANSWER-be made to the lowest responsible and responsive
bidder
Firm Fixed Price (FFP) - CORRECT ANSWER-price set is not subject to change, under any
circumstances.
Cost Plus Fixed Fee (CPFF) - CORRECT ANSWER-Occurs if item is experimental and specifications are
not firm, or if costs in the future cannot be predicted.
Cost No Fee (CNF) - CORRECT ANSWER-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) - CORRECT ANSWER-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 - CORRECT ANSWER-what you agree to pay
Cost - CORRECT ANSWER-what you will continue to pay (ex. maintenance, insurance, accessories)
How can you Internally manage cost - CORRECT ANSWER-process improvement, supply chain
efficiencies
How can you externally manage costs - CORRECT ANSWER-negotiation, strategic cost management
Strategic cost management - CORRECT ANSWER-Externally focused process of analyizing costs in
terms of overall value chain
Strategic cost management focuses on - CORRECT ANSWER-year over year cost savings
2 primary tools of Strategic cost mgmt: - CORRECT ANSWER-ABC Analysis
