CCNP Pricing Analysis 4 — Questions and Answers
Question 1: A 'price spike' analysis is most useful when a buyer wants to:
- Determine the supplier's break-even point
- Identify sudden, unexplained increases in a supplier's price history (Correct answer)
- Calculate the net present value of contract payments
- Assess foreign exchange risk in international contracts
Correct answer: Identify sudden, unexplained increases in a supplier's price history
Price spike analysis flags anomalous price jumps in historical data that may indicate unjustified increases or data errors.
Question 2: Which cost type is defined as a cost that can be identified specifically with a final cost objective?
- Indirect cost
- Direct cost (Correct answer)
- Overhead cost
- G&A cost
Correct answer: Direct cost
A direct cost is attributable to a specific contract, project, or final cost objective without allocation through an intermediate pool.
Question 3: In competitive pricing strategy, 'penetration pricing' means:
- Setting price high to skim maximum profit from early adopters
- Setting price low initially to gain market share, then raising it (Correct answer)
- Pricing at parity with the leading competitor
- Setting price based on cost-plus a fixed markup
Correct answer: Setting price low initially to gain market share, then raising it
Penetration pricing sacrifices near-term margin to build volume and lock in customers before competitors respond.
Question 4: What is 'contract price redetermination' and when is it most appropriate?
- Retroactively adjusting contract price after delivery based on actual costs; used when costs are highly uncertain at award (Correct answer)
- Unilaterally changing price by the contracting officer mid-performance
- Re-bidding a contract after the original contractor defaults
- Adjusting price annually using a fixed 3% inflation factor
Correct answer: Retroactively adjusting contract price after delivery based on actual costs; used when costs are highly uncertain at award
Price redetermination allows the contract price to be reset at a specified point using actual cost data, reducing risk when pre-award cost uncertainty is high.
Question 5: A supplier's general and administrative (G&A) expense pool is typically allocated using which base?
- Direct labor hours only
- Total cost input (TCI) or value-added base (Correct answer)
- Number of employees
- Square footage of facilities
Correct answer: Total cost input (TCI) or value-added base
G&A is most commonly allocated on a total cost input base, distributing overhead across all contract costs proportionally.
Question 6: Which pricing analysis tool plots a supplier's proposed price against a distribution of historical or competitive prices to assess reasonableness?
- Regression analysis
- Box-and-whisker (box plot) chart (Correct answer)
- Gantt chart
- Critical path method
Correct answer: Box-and-whisker (box plot) chart
A box plot shows median, quartiles, and outliers, making it easy to see whether a proposed price falls within or outside the normal range.
Question 7: When a supplier refuses to provide certified cost data for a TINA-covered action, the buyer's primary remedy is:
- Terminating the contract for default immediately
- Seeking a price reduction or defective pricing claim after contract award (Correct answer)
- Waiving the TINA requirement automatically
- Reducing the contract scope by 50%
Correct answer: Seeking a price reduction or defective pricing claim after contract award
If a supplier submits defective (inaccurate, incomplete, or non-current) cost data, the government may recover the resulting overpricing plus interest and penalties.
CCNP Pricing Analysis 4
A 'price spike' analysis is most useful when a buyer wants to: