LO2 Flashcards
What two types of data can provide info on costs and prices?
Desk:
AKA Secondary Research
Market reports
Official stats
Internet
Internal
Trade publications like websites
FILED
AKA: Primary
A collection of Raw or Primary Data
Quantitative / Qualitative
Request for Info
What is a Direct Cost
A price directly associated with a product - e.g cost of a bolt
What is an indirect cost
A price of something that cannot be directly attributed to an item - e.g. cost of heating, electric. Otherwise known as overheads
Fixed Costs are…
A price which is agreed by supplier and buyer which is not typically subject to change - e.g. wages
Variable costs are….
A cost which is subject to change, based on quantity or time of year. E.g. Raw Materials
What is a discounted cash flow analysis (DCF)?
DCF analysis attempts to determine the value of an investment today, based on projections of how much money that investment will generate in the future.
Define a cash budget
A cash budget is designed to project the future cash inflows and outflows
What is a Purchase Cost analysis?
Purchase cost analysis, supplier appraisal, and The Procurement Cycle are typically used by Procurement before an investment appraisal is required.
The average rate of return is a way of comparing the profitability of different choices over the expected life of an investment.
How long is it going to take for it to stop owing us money
Define the term business needs
Inputs and/or things that can add value by transforming them into goods and/or services that meet customer needs.
Zero Based Budgeting is…
Zero based budgeting allows you to start from scratch and not assume that previous spend must be repeated.
What Is Incremental Budgeting?
Incremental budgeting is the process of creating a new budget by making minor changes to the current budget. An incremental budget uses the current year’s budget as a baseline, which finance teams then adjust by incremental amounts.
What is a fixed budget?
A fixed budget, also known as a static budget, is a budget that does not change or adjust to the actual volume of output produced or sales levels achieved. Once it’s set, the budgeted amounts for revenues and expenses remain unchanged regardless of actual business performance.
What is a Flexible Budget?
Flexible budgets are essentially budgets that can be adjusted depending upon revenue and cost changes throughout the fiscal year, accounting for expected unpredictability.
What is the main objective for Procurement when preparing a business case?
Detail alternatives and options in order to allow comparison of benefits
Detail alternatives and options in a comparative context to allow management to clearly identify the most advantageous approach to a project is what the objective of a business case is really all about. The other options would not always be part of a business case
open book contract
In an open-book contract, the buyer and seller of work/services agree on which costs are remunerable and the margin that the supplier can add to these costs. The project is then invoiced to the customer based on the actual costs incurred plus the agreed margin
What is the difference between PRICE ANALYSIS and COST ANALYSIS
Price: This shows going rate of product vs quote from supplier in the market
Cost: focuses on the cost relating to the supplier’s production of this product, with an open book contract margins and suppliers’ processing costs are already provided and agreed upon.
Is there a difference between the terms cost and price?
Cost is typically the expense incurred for making a product or service that is sold by a company. Price is the amount a customer is willing to pay for a product or service
What is the definition of cost?
Cost is typically the expense incurred for making a product or service that is sold by a company
What is backwards Integration?
backward integration is when a company buys another company that supplies the products or services needed for production.
Porters 5 Forces:
Name the 5 forces
Competitor Rivalry
Threat of New Entrants
Bargaining Power of Buyer
Bargaining Power of Suplier
What is the main purpose of Value Analysis?
Evaluate value-add of existing products
What are the disadvantages of using a specification within a contract?
Creating a specification can be time consuming
Quality control and inspection can be costly when ensuring suppliers meet the required specification
What does ISO 14000 cover?
Life Cycle Analysis
Continuous Improvement
