CPP Procurement Planning & Cost Analysis 2

Question 1

A buyer is evaluating whether to produce a component in-house or outsource it. Which cost should be EXCLUDED from the make-or-buy comparison?

Accepted Answer

Sunk costs of equipment already purchased and fully paid

Answer

Sunk costs cannot be recovered regardless of the decision, so they are irrelevant to make-or-buy analysis.

Question 2

Fixed costs are $50,000, selling price is $25 per unit, and variable cost is $15 per unit. What is the break-even volume?

Accepted Answer

5,000 units

Answer

Break-even = fixed costs / (price - variable cost) = 50,000 / 10 = 5,000 units.

Question 3

Under an 80% learning curve, if the first unit takes 100 labor hours, how many hours should the fourth unit take?

Accepted Answer

64 hours

Answer

Each doubling of cumulative output reduces time to 80%: 100 to 80 (unit 2) to 64 (unit 4).

Question 4

Which approach builds an estimate of what a product SHOULD cost based on materials, labor, overhead, and reasonable profit?

Accepted Answer

Should-cost analysis

Answer

Should-cost modeling estimates an item's efficient cost from its component cost elements to support negotiation.

Question 5

A procurement team aggregates purchase data across business units to identify consolidation opportunities. This activity is called:

Accepted Answer

Spend analysis

Answer

Spend analysis collects, cleanses, and categorizes spend data to reveal leverage and savings opportunities.

CPP - Certified Procurement Professional Practice Test