CIPS Exam L4M5 Topic 4 Question 16 Discussion

Actual exam question for CIPS's L4M5 exam

Question #: 16
Topic #: 4

Cost and price analysis is very important for buyers when they are preparing for a negotiation with supplier. Which of the following is a benefit of knowing supplier's fixed costs?

AThe buyer would be able to know the right volume to reach break-even point

BThe buyer would be able to know the point at which the supplier would reject the offer

CWith the sole understanding of supplier's fixed cost, the buyer would be able to know the volume at which supplier maximises their profit in short-run

DThe buyer would be able to get a comprehensive picture of supplier's efficiency

Show Suggested Answer

Suggested Answer: A

Knowing supplier's fixed and variable costs is beneficial for the buyer in a negotiation. With these insights, the buyer would know the volume at which the supplier reaches break-even points and then offers significant discount due to economies of scale.

LO 2, AC 2.1

by Art at May 07, 2022, 06:33 PM

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