IDIS 424 Exam 2 Questions with
Complete Solutions12
Break Even Analysis Equation - ANSWERS-Net Income = P*X - VC*X - FC
P= average purchase price
X= units produced
VC = variable cost/unit of production
FC = fixed cost of production
Break Even Analysis - ANSWERS--Identify where revenue equals cost
-Expected profit or loss at different production volumes
TCO - ANSWERS--purchasing tool, which provides a new
approach for supplier selection
-requires a purchaser to identify and measure cost factors beyond the standard unit price
-present value of the total costs over life cycle
of the purchased item for evaluating the different supply alternatives
TCO Formula - ANSWERS-PV_j = (C_j)/(1+I)^j
C_j is total cost in year j with I interest rate
TCO = sum of PV_j for all years
Cost Elements in TCO - ANSWERS--Purchase price
-Acquisition cost
, -Usage costs
-End of life costs
Factors to be Considered with TCO - ANSWERS--Use only for evaluating large purchases
-Obtain senior management buy in
-Work in a team
-Focus on the big costs first
-Obtain a realistic estimate of the life cycle
Hand to mouth Strategy - ANSWERS-a policy of buying for immediate needs only.
Forward Strategy - ANSWERS-a policy for buying in advance
of the time when the item is actually needed.
Hand to Mouth vs Forward Strategy - ANSWERS--Hand-to-mouth is advantageous when prices
are
expected to fall.
-Forward buying is advantageous when prices are
expected to rise.
Mixed Buying - ANSWERS--Combination of Hand to Mouth and Forward Strategy
-Applicable to cases where the item has predictable seasonal price patterns
-Can lead to significant cost savings due to reduction of purchasing cost and inventory holding
cost
Mixed Buying Equation - ANSWERS-(Yearly Demand/2)*Holding Cost
Complete Solutions12
Break Even Analysis Equation - ANSWERS-Net Income = P*X - VC*X - FC
P= average purchase price
X= units produced
VC = variable cost/unit of production
FC = fixed cost of production
Break Even Analysis - ANSWERS--Identify where revenue equals cost
-Expected profit or loss at different production volumes
TCO - ANSWERS--purchasing tool, which provides a new
approach for supplier selection
-requires a purchaser to identify and measure cost factors beyond the standard unit price
-present value of the total costs over life cycle
of the purchased item for evaluating the different supply alternatives
TCO Formula - ANSWERS-PV_j = (C_j)/(1+I)^j
C_j is total cost in year j with I interest rate
TCO = sum of PV_j for all years
Cost Elements in TCO - ANSWERS--Purchase price
-Acquisition cost
, -Usage costs
-End of life costs
Factors to be Considered with TCO - ANSWERS--Use only for evaluating large purchases
-Obtain senior management buy in
-Work in a team
-Focus on the big costs first
-Obtain a realistic estimate of the life cycle
Hand to mouth Strategy - ANSWERS-a policy of buying for immediate needs only.
Forward Strategy - ANSWERS-a policy for buying in advance
of the time when the item is actually needed.
Hand to Mouth vs Forward Strategy - ANSWERS--Hand-to-mouth is advantageous when prices
are
expected to fall.
-Forward buying is advantageous when prices are
expected to rise.
Mixed Buying - ANSWERS--Combination of Hand to Mouth and Forward Strategy
-Applicable to cases where the item has predictable seasonal price patterns
-Can lead to significant cost savings due to reduction of purchasing cost and inventory holding
cost
Mixed Buying Equation - ANSWERS-(Yearly Demand/2)*Holding Cost
