CPP Cost Reduction & Value Analysis Strategies 3

Question 1

In a make-or-buy decision, which factor most strongly favors the 'buy' option?

Accepted Answer

Supplier prices are below the company's internal production cost

Answer

When an external supplier can produce the item at a lower cost than internal manufacturing, outsourcing is financially advantageous.

Question 2

Which of the following BEST represents an 'indirect cost' in a total cost of ownership (TCO) analysis?

Accepted Answer

Cost of incoming inspection and quality testing

Answer

Incoming inspection costs are indirect costs not reflected in the purchase price but are a real cost of acquiring the good.

Question 3

A value analysis team determines that a purchased bracket is over-engineered with tolerances tighter than the application requires. The recommended action is to:

Accepted Answer

Relax the specifications to allow lower-cost manufacturing

Answer

Relaxing unnecessarily tight tolerances reduces manufacturing complexity and cost without sacrificing functional performance.

Question 4

Price analysis is DIFFERENT from cost analysis in that price analysis:

Accepted Answer

Evaluates the reasonableness of price without examining the supplier's cost structure

Answer

Price analysis compares offered prices to market benchmarks or historical prices without examining how the supplier built the price.

Question 5

The '80/20 rule' applied to spend analysis means that:

Accepted Answer

20% of suppliers or items typically represent 80% of total spend

Answer

Pareto's principle in spend management identifies the vital few suppliers or categories that drive the majority of expenditure, focusing leverage efforts.

(CPP) Certified Purchasing Professional Practice Test

(CPP) Certified Purchasing Professional Practice Test

CPP Cost Reduction & Value Analysis Strategies 3