A local manufacturer of irrigation pumps is negotiating with a supplier for a newly tooled aluminium casting. The supplier says the quoted price cannot be reduced due to a significant tooling investment. The buyer has a credible annual volume forecast and estimated variable cost per unit. What analysis would best help the buyer test whether the proposed price gives the supplier a reasonable return at the expected volume?

Question

Answer

Estimate the supplier’s break-even volume and expected profit using fixed cost, variable cost, price, and demand.

Answer

Compare the supplier’s price movement with a broad inflation index for industrial manufacturing inputs.

Answer

Ask the supplier to reduce the quoted price by the same percentage as the buyer’s annual savings target.

Answer

Select the supplier with the lowest total delivery charge because transport cost is the easiest cost to verify.

Crowdly

A local manufacturer of irrigation pumps is negotiating with a supplier for a ne...

Want instant access to all verified answers on cems.myexams.unisa.ac.za?