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1 | | Activity based costing attempts to correct the distortions built into product costing: |
| | A) | by improving the way that direct costs are allocated. |
| | B) | by improving the way that the learning curve is applied to direct labor costs. |
| | C) | by tracking cost drivers of indirect costs and turning indirect costs into direct. |
| | D) | by tracking cost drivers of direct costs and turning direct costs into indirect. |
| | E) | by capturing labor and material usage more accurately. |
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2 | | The zone of negotiation: |
| | A) | indicates the feasibility of negotiation and the likelihood of an agreement. |
| | B) | is the mindset that one must be in prior to initiating face-to-face negotiations. |
| | C) | may be positive or negative depending on the gap between buyer's and seller's objectives. |
| | D) | is the range of options the buyer will consider during the negotiation. |
| | E) | is perceived in exactly the same way by buyer and seller in a negotiation. |
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3 | | When developing a negotiation strategy, the negotiator should assess the positions of strength of both (all) parties to: |
| | A) | decide if negotiation makes sense. |
| | B) | establish negotiation points. |
| | C) | avoid setting unrealistic expectations. |
| | D) | b and c. |
| | E) | a, b, and c. |
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4 | | The learning curve is based on: |
| | A) | the difficult to prove premise that more training leads to lower costs. |
| | B) | the assumption that labor will never forget how to do something. |
| | C) | a direct relationship to overhead costs. |
| | D) | the common principle that one becomes more proficient with experience. |
| | E) | an indirect relationship to direct material costs. |
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5 | | Total cost of ownership (TCO) can used to: |
| | A) | highlight cost reduction opportunities. |
| | B) | compare suppliers in a supplier selection decision. |
| | C) | prepare for a negotiation. |
| | D) | assess the reasonableness of a supplier's prices. |
| | E) | all of the above. |
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6 | | When a supplier offers a lower price for a larger quantity, the buyer should: |
| | A) | order according to the EOQ model. |
| | B) | determine the return on investment. |
| | C) | always take the quantity discount. |
| | D) | never take the quantity discount. |
| | E) | determine the preference of senior management. |
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7 | | Which tool will focus everyone in the organization on cost management: |
| | A) | learning curve. |
| | B) | negotiation. |
| | C) | target costing. |
| | D) | activity based costing. |
| | E) | portfolio analysis. |
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8 | | In portfolio analysis, the goal when purchasing non-critical or routine spend is to: |
| | A) | assure quality at expected levels. |
| | B) | minimize acquisition time and cost. |
| | C) | minimize price per unit. |
| | D) | reduce or eliminate customization. |
| | E) | assure continuous supply at lowest total cost of ownership. |
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9 | | The process of attempting to determine all cost elements such as acquisition price, purchasing administration, follow-up, expediting, inspection and testing, rework, scrap, downtime, lost sales and customer returns is called: |
| | A) | total cost of ownership. |
| | B) | activity-based costing. |
| | C) | target costing. |
| | D) | competitive bidding. |
| | E) | learning curve. |
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10 | | In portfolio analysis, the goal when purchasing leverage items is: |
| | A) | assure supply. |
| | B) | assure continuous supply at lowest total cost of ownership. |
| | C) | assure quality at expected levels. |
| | D) | minimize acquisition time and cost and price per unit. |
| | E) | reduce or eliminate customization. |
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