Question 1

Governments play a role in establishing prices by establishing production and import quotas and by regulating the ways that buyers and sellers are allowed to behave in agreeing on prices.

Accepted Answer

A) True 
 B)False

Question 2

Identical prices received from various sources should:

Accepted Answer

A)   be expected when the specification is highly customized.
B)   always make the buyer suspicious of collusion.
C)   only draw attention if the buyer is dissatisfied with the price quoted.
D)   draw attention if the specification is complex or detailed.
E)   result in the buyer taking legal action against all bidders.F) C) and D)
G) B) and E) D

Question 3

The market approach to pricing:

Accepted Answer

A)   means prices are set to cover direct costs, contribute to indirect, and attain a profit.
B)   is the only defensible pricing mechanism for ethical companies to use.
C)   implies that prices are set based on what the market will bear.
D)   means that prices are adjusted regularly to ensure that the selling organization recoups all its market costs.
E)   implies that market analysis is the only technique that should be employed to negotiate prices.F) C) and E)
G) C) and D)

Question 4

Most direct costs are:

Accepted Answer

A)   variable costs.
B)   overhead costs.
C)   general and administrative costs.
D)   semivariable costs.
E)   fixed costs.F) D) and E)
G) B) and D)

Question 5

Items for which prices are comparatively low, and the cost of price reduction efforts may exceed any price savings realized, are called:

Accepted Answer

A)   sensitive commodities.
B)   raw materials.
C)   special items.
D)   standard production items.
E)   MRO items.F) B) and D)
G) A) and E)

Question 6

To be fair, the basis and terms of cancellation should be agreed on in advance and made part of the terms and conditions of the purchase order.

Accepted Answer

A) True 
 B)False

Question 7

An escalator clause provides for an increase, as well as a decrease, in price if costs change.

Accepted Answer

A) True 
 B)False

Question 8

A fair price:

Accepted Answer

A)   is based on market conditions, and cost structure has no bearing on the determination of a fair price.
B)   is the lowest price that ensures a continuous supply of the proper quality where and when needed and at which the supplier makes a reasonable profit.
C)   is based on the cost to produce an item or service without consideration for the supplier's profit margin.
D)   is an amount arrived at through negotiations where the seller's price is a starting point..
E)   is when all sellers of equal goods or services receive the same per unit price.F) A) and B)
G) A) and C)

Question 9

Forward buying:

Accepted Answer

A)   offsets transactions to protect against price and exchange risks
B)   involves no risk for the buying organization.
C)   involves purchasing for known or estimated near-term requirements.
D)   is the same as speculation.
E)   seeks to take advantage of price movements.F) B) and E)
G) A) and D) C

Question 10

A cash discount allows:

Accepted Answer

A)   the seller to secure prompt payment, but has no benefits for the buyer.
B)   the buyer to pay a lower price per unit, but has no benefits for the seller.
C)   the seller to secure prompt payment, and the buyer to pay a lower price per unit.
D)   the seller to demand payment in cash on demand C.O.D.)  upon receipt of goods.
E)   the buyer to always calculate the discount based on the delivery date.F) B) and D)
G) A) and C)

Question 11

For goods bought on a non-recurring basis, the contract may provide for a reduction in price should the buyer ever again purchase the item.

Accepted Answer

A) True 
 B)False

Question 12

The Robinson-Patman and Sherman Antitrust Acts are primarily designed to prevent the stronger party from imposing too onerous conditions on the weaker one and preventing collusion so that competition will be maintained.

Accepted Answer

A) True 
 B)False

Question 13

In the event the bidder does not make proper payment to its suppliers, the bond that protects the buyer against liens that might be granted to these suppliers, is called a:

Accepted Answer

A)   performance bond.
B)   surety bond.
C)   bid bond
D)   payment bond.
E)   lien bond.F) B) and D)
G) All of the above

Question 14

One justification for a quantity discount is that the buyer should not pay more than the actual cost of packing, crating, and transportation.

Accepted Answer

A) True 
 B)False

Question 15

If the buyer wants to motivate the seller to manage total costs, the best type of contract is:

Accepted Answer

A)   firm-fixed-price FFP) .
B)   cost-plus-incentive-fee CPIF) 
C)   firm-fixed-price plus incentive fee FFPIF) .
D)   cost-plus-fixed-fee CPFF) .
E)   cost-no-fee CNF) .F) C) and D)
G) A) and B)

Question 16

Canceling a contract for a technicality when market prices are falling is considered a perfectly acceptable and ethical practice.

Accepted Answer

A) True 
 B)False  False

Question 17

The prime function of an organized commodity exchange is to furnish an established marketplace where:

Accepted Answer

A)   the forces of supply and demand operate freely.
B)   commodity prices can be controlled.
C)   sellers of the same commodity can come together to set prices.
D)   products that are difficult to grade can be traded.
E)   there are only a limited number of buyers and sellers.F) A) and C)
G) B) and D)

Question 18

A cash discount of 2/10, N/30 2 percent cash discount if payment is made in 10 days, with the gross amount due in 30 days) is the equivalent of approximately a 36 percent interest rate.

Accepted Answer

A) True 
 B)False

Question 19

Online reverse auctions are useful means of price determination for special items.

Accepted Answer

A) True 
 B)False

Question 20

Competitive bidding, in general, is the least efficient means of obtaining a fair price for items bought.

Accepted Answer

A) True 
 B)False

Exam 10: Price

Governments play a role in establishing prices by establishing production and import quotas and by regulating the ways that buyers and sellers are allowed to behave in agreeing on prices.

Correct AnswerverifiedShow Answer

Identical prices received from various sources should:

Correct AnswerverifiedD

The market approach to pricing:

Correct AnswerverifiedShow Answer

Most direct costs are:

Correct AnswerverifiedShow Answer

Items for which prices are comparatively low, and the cost of price reduction efforts may exceed any price savings realized, are called:

Correct AnswerverifiedShow Answer

To be fair, the basis and terms of cancellation should be agreed on in advance and made part of the terms and conditions of the purchase order.

Correct AnswerverifiedShow Answer

An escalator clause provides for an increase, as well as a decrease, in price if costs change.

Correct AnswerverifiedShow Answer

A fair price:

Correct AnswerverifiedShow Answer

Forward buying:

Correct AnswerverifiedC

A cash discount allows:

Correct AnswerverifiedShow Answer

For goods bought on a non-recurring basis, the contract may provide for a reduction in price should the buyer ever again purchase the item.

Correct AnswerverifiedShow Answer

The Robinson-Patman and Sherman Antitrust Acts are primarily designed to prevent the stronger party from imposing too onerous conditions on the weaker one and preventing collusion so that competition will be maintained.

Correct AnswerverifiedShow Answer

In the event the bidder does not make proper payment to its suppliers, the bond that protects the buyer against liens that might be granted to these suppliers, is called a:

Correct AnswerverifiedShow Answer

One justification for a quantity discount is that the buyer should not pay more than the actual cost of packing, crating, and transportation.

Correct AnswerverifiedShow Answer

If the buyer wants to motivate the seller to manage total costs, the best type of contract is:

Correct AnswerverifiedShow Answer

Canceling a contract for a technicality when market prices are falling is considered a perfectly acceptable and ethical practice.

Correct AnswerverifiedFalse

The prime function of an organized commodity exchange is to furnish an established marketplace where:

Correct AnswerverifiedShow Answer

A cash discount of 2/10, N/30 2 percent cash discount if payment is made in 10 days, with the gross amount due in 30 days) is the equivalent of approximately a 36 percent interest rate.

Correct AnswerverifiedShow Answer

Online reverse auctions are useful means of price determination for special items.

Correct AnswerverifiedShow Answer

Competitive bidding, in general, is the least efficient means of obtaining a fair price for items bought.

Correct AnswerverifiedShow Answer

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D

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C

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False

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