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?
A.
The buyer would be able to know the right volume to reach break-even point
B.
The buyer would be able to know the point at which the supplier would reject the offer
C.
With 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
D.
The buyer would be able to get a comprehensive picture of supplier's efficiency
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.
[Reference: CIPS study guide page 80-81, LO 2, AC 2.1, , , , ]
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