Supply Chain Financial Management and Cost Analysis Flashcards

A proposed warehouse automation project has a positive net present value at the firm's cost of capital. What does this indicate?

Answer: The project is expected to add value and should be considered for acceptance

Positive NPV means discounted cash inflows exceed the investment, creating value.

A $200,000 transportation management system saves $50,000 per year. What is the simple payback period?

Answer: 4 years

Payback = $200,000 ÷ $50,000 per year = 4 years.

In a make-versus-buy analysis, which costs are most relevant to the decision?

Answer: Avoidable costs that would be eliminated by outsourcing

Only costs that change between alternatives—avoidable costs—are relevant.

How does reverse factoring (supply chain finance) typically benefit suppliers?

Answer: Suppliers get early payment at a financing rate based on the buyer's stronger credit

A buyer-led program lets suppliers sell approved invoices early at low cost tied to the buyer's credit rating.

Under Incoterms 2020 DDP (Delivered Duty Paid), who bears the cost of import duties?

Answer: The seller

DDP places maximum obligation on the seller, including import clearance and duties.

Average inventory value is $400,000 and the annual carrying cost rate is 25%. What is the annual carrying cost?

Answer: $100,000

$400,000 × 25% = $100,000 per year.

Annual demand is 10,000 units, ordering cost is $50 per order, and holding cost is $4 per unit per year. What is the economic order quantity?

Answer: 500 units

EOQ = √(2 × 10,000 × 50 ÷ 4) = √250,000 = 500 units.