A buyer can use sources of information to review indirect costs associated with the manufacture of goods to support supplier negotiations. Is this statement true?
A.
No, because the supplier’s quotation is the only source of information
B.
Yes, because the buyer can understand the cost build-up of the goods
C.
No, because the only information available is for direct costs
Comprehensive and Detailed Explanation (from CIPS L4M2 – Cost Management and Analysis)
CIPS teaches that indirect costs (e.g. overheads, admin, factory costs) can be estimated by using:
Supplier financial statements,
Benchmarking,
Industry cost models.
Analysing these supports negotiations by revealing true cost drivers.
Therefore, Option B is correct — buyers can and should assess indirect costs when evaluating total cost and negotiating.
Relevant L4M2 references:
“Understanding direct and indirect cost elements”
“Cost analysis and should-cost models in business case preparation”
Contribute your Thoughts:
Chosen Answer:
This is a voting comment (?). You can switch to a simple comment. It is better to Upvote an existing comment if you don't have anything to add.
Submit