CCNP Pricing Analysis 2 — Questions and Answers
Question 1: Which pricing model charges customers based on the number of units consumed or transactions processed?
- Fixed-price model
- Cost-plus model
- Usage-based (variable) pricing (Correct answer)
- Subscription pricing
Correct answer: Usage-based (variable) pricing
Usage-based pricing ties charges directly to consumption volume, aligning costs with actual use.
Question 2: In a Should-Cost analysis, which of the following is NOT typically included as a direct cost element?
- Raw materials
- Direct labor
- Overhead allocation
- Seller's profit margin (Correct answer)
Correct answer: Seller's profit margin
Seller's profit margin is a separate line item negotiated on top of direct costs, not part of the cost build-up itself.
Question 3: A supplier quotes $500,000 for a contract with $350,000 in direct costs. What is the supplier's markup percentage?
- 30%
- 42.9% (Correct answer)
- 70%
- 150%
Correct answer: 42.9%
Markup = ($500,000 - $350,000) / $350,000 × 100 = $150,000 / $350,000 ≈ 42.9%.
Question 4: Which escalation clause type ties price adjustments to a specific published government or industry index?
- Retroactive escalation
- Price-in-effect escalation
- Index-based escalation (Correct answer)
- Fixed escalation cap
Correct answer: Index-based escalation
Index-based escalation links contract price changes to movements in a recognized index such as the CPI or PPI.
Question 5: When evaluating a supplier's overhead rate, a buyer should compare it against:
- The supplier's revenue growth rate
- Industry benchmark overhead rates for similar firms (Correct answer)
- The buyer's own overhead rate
- The prime rate set by the Federal Reserve
Correct answer: Industry benchmark overhead rates for similar firms
Benchmarking against industry norms helps identify whether the supplier's overhead is reasonable or inflated.
Question 6: A 'tear-down analysis' in pricing analysis refers to:
- Analyzing a competitor's financial statements
- Physically disassembling a product to estimate its manufacturing cost (Correct answer)
- Reviewing supplier invoices line by line
- Canceling an overpriced contract clause
Correct answer: Physically disassembling a product to estimate its manufacturing cost
Tear-down analysis involves disassembling a product to reverse-engineer its components and estimate should-cost.
Question 7: Which cost principle under FAR 31.201 renders a cost allowable for government contracts?
- The cost must be higher than the market rate
- The cost must be reasonable, allocable, and compliant with cost accounting standards (Correct answer)
- The cost must be approved by the contracting officer before incurrence
- The cost must be directly tied to a deliverable milestone
Correct answer: The cost must be reasonable, allocable, and compliant with cost accounting standards
FAR 31.201-2 states that a cost is allowable if it is reasonable, allocable, and meets applicable CAS requirements.
CCNP Pricing Analysis 2
Which pricing model charges customers based on the number of units consumed or transactions processed?