Chapter 11 Flashcards
DEF: Price Analysis
Process of comparing supplier prices against external price benchmarks.
DEF: Market Price Analysis
Identification and analysis of external forces that drive price change.
COMMON APPROACH
Costs drives Price!!!
This is POST-PRODUCTION
Efforts focus on reducing costs internally and cross enterprises so prices can come down.
Elements of Price & Cost Drivers
- ) Profit Margin
- ) Selling & Administrative Cost
- ) Production Overhead
- ) Direct Labor Codt
- ) Direct Materials Cost
Think about Lego activity…
DEF: Cost Analysis
Analyzing each individual cost element that makes up final price.
DEF: Reverse Price Analysis (should cost)
Analyzing a supplier’s overall cost structure to ensure that costs are assigned in an appropriate manner.
DEF: Total Cost Analysis
Process to determine all costs associated with the purchase, use & disposal of an item
Cost Analysis/Reverse Price Analysis
Detailed production cost breakdown…
Opportunities for Cost Reduction
- ) Plant Utilization
- ) Process Capability
- ) Learning curve effect
- ) Supplier’s workforce
- ) Management Capability
- ) Supply management efficiency
DEF: Total Cost of Ownership
Process of assembling all costs (direct & indirect) associated w/ the purchase, use & disposal of a product, service, or capital equipment that are incurred over its expected life.
Purchase price
Invoice amount paid to supplier
Acquisition costs
Costs of bringing product to buyer
Sourcing/ordering costs, transportation costs, etc.
Usage costs
Conversion & support costs
Inventory, maintenance, etc.
End-of-life costs
Net amounts received
Total Cost of Ownership note…
There are times when the lowest price will not be the best total cost option for the buyer.
Ex: Wild Turkey Bourbon
