CCNP Pricing Analysis 3 — Questions and Answers
Question 1: What does the 'learning curve' concept predict about unit costs as cumulative production volume doubles?
- Unit costs increase proportionally
- Unit costs remain stable
- Unit costs decrease by a fixed percentage (Correct answer)
- Unit costs become unpredictable
Correct answer: Unit costs decrease by a fixed percentage
The learning curve theory holds that each time cumulative output doubles, unit labor cost falls by a consistent percentage (e.g., 80%).
Question 2: Price analysis differs from cost analysis primarily because price analysis:
- Requires a detailed breakdown of cost elements
- Compares offered prices without examining underlying cost data (Correct answer)
- Focuses solely on labor costs
- Mandates a government audit of the supplier's books
Correct answer: Compares offered prices without examining underlying cost data
Price analysis evaluates reasonableness by comparing prices to market data or historical prices, without requiring cost breakdowns.
Question 3: Which of the following is an example of a 'price-related factor' in best-value source selection?
- Technical approach quality
- Past performance rating
- Life-cycle cost including maintenance and disposal (Correct answer)
- Management plan thoroughness
Correct answer: Life-cycle cost including maintenance and disposal
Life-cycle cost captures all ownership costs beyond the initial purchase price and is a price-related evaluation factor.
Question 4: In a time-and-materials (T&M) contract, the buyer's primary pricing risk is:
- The supplier charging too low a fixed fee
- Unlimited cost growth if hours and materials are not monitored (Correct answer)
- The inability to adjust labor categories mid-contract
- Supplier unwillingness to provide fixed labor rates
Correct answer: Unlimited cost growth if hours and materials are not monitored
T&M contracts provide the least cost control because the buyer pays for all hours worked plus materials, creating open-ended liability.
Question 5: A buyer negotiates a $1M firm-fixed-price contract. The supplier's actual cost turns out to be $700K. Who retains the $300K profit?
- The buyer receives a credit for cost underruns
- The supplier keeps all profit; the buyer bears no additional cost (Correct answer)
- Profit is shared 50/50 under standard FAR rules
- The contracting officer reallocates the savings
Correct answer: The supplier keeps all profit; the buyer bears no additional cost
Under FFP contracts, the supplier assumes all cost risk and retains all profit from underruns; the buyer pays the fixed price regardless.
Question 6: Which technique estimates future costs based on a mathematical relationship between cost and a physical or performance characteristic?
- Analogous estimating
- Parametric estimating (Correct answer)
- Bottom-up estimating
- Expert judgment
Correct answer: Parametric estimating
Parametric estimating uses statistical models (e.g., cost per pound, cost per line of code) to estimate costs from measurable parameters.
Question 7: Under the Truth in Negotiations Act (TINA), certified cost or pricing data must be submitted when a contract exceeds:
- $100,000
- $500,000
- $2 million (Correct answer)
- $750,000
Correct answer: $2 million
TINA (now codified at 10 U.S.C. § 3702) requires certified cost or pricing data for contracts exceeding $2 million (as of current threshold).
CCNP Pricing Analysis 3
What does the 'learning curve' concept predict about unit costs as cumulative production volume doubles?