CPP CPP Cost Management & Economics 2 — Questions and Answers
Question 1: A packaging Bill of Materials (BOM) is used primarily to:
- List every component and material needed to produce a finished package with quantities and costs (Correct answer)
- Document regulatory approvals
- Record supplier quality audits
- Track shipment delivery dates
Correct answer: List every component and material needed to produce a finished package with quantities and costs
A BOM provides a structured itemization of all packaging components, their specifications, quantities, and unit costs, forming the basis for cost estimation and procurement.
Question 2: What is 'cube efficiency' and why does it matter economically in packaging?
- How well a package fills available truck or pallet space — higher efficiency lowers freight cost per unit (Correct answer)
- The geometric shape accuracy of a rigid container
- The ratio of product weight to package weight
- A measure of compressive strength under cube-stacking
Correct answer: How well a package fills available truck or pallet space — higher efficiency lowers freight cost per unit
Cube efficiency measures how completely a package fills transportation and storage space; higher efficiency reduces wasted volume and lowers freight and warehousing cost per unit.
Question 3: When a supplier quotes an 'MOQ' of 50,000 units, a packaging manager must consider which cost trade-off?
- Lower per-unit cost vs. higher inventory carrying and potential obsolescence costs (Correct answer)
- Higher per-unit cost vs. faster delivery
- Lower quality vs. higher cost
- Shorter lead time vs. lower quantity
Correct answer: Lower per-unit cost vs. higher inventory carrying and potential obsolescence costs
Meeting an MOQ earns a lower unit price but requires holding more inventory, which incurs carrying costs and risk of obsolescence if designs change.
Question 4: What is a 'value engineering' exercise in packaging?
- A systematic review to achieve required function at the lowest total cost without sacrificing performance (Correct answer)
- A cost audit performed by the finance department
- A consumer perception study on package design
- A process to negotiate lower raw material prices
Correct answer: A systematic review to achieve required function at the lowest total cost without sacrificing performance
Value engineering analyzes each packaging function to identify lower-cost alternatives that still meet performance requirements, eliminating cost without eliminating value.
Question 5: Fixed tooling costs for custom injection-molded plastic containers are best amortized by:
- Spreading them across a high volume of units to minimize cost per unit (Correct answer)
- Charging them entirely to the first production run
- Expensing them as a one-time R&D cost
- Passing them directly to the retailer
Correct answer: Spreading them across a high volume of units to minimize cost per unit
Dividing a fixed tooling cost across a large number of units progressively reduces the per-unit tooling burden, making custom packaging more cost-competitive at scale.
Question 6: Which costing method assigns overhead costs to packaging products based on the specific activities that drive those costs?
- Activity-Based Costing (ABC) (Correct answer)
- Standard costing
- Variable costing
- Absorption costing
Correct answer: Activity-Based Costing (ABC)
Activity-Based Costing traces overhead to the activities that actually consume resources, providing more accurate cost information for packaging decisions than blanket allocation methods.
CPP CPP Cost Management & Economics 2
A packaging Bill of Materials (BOM) is used primarily to: