3. Firms sometimes ignore the total cost of ownership for which reasons? A. Some

Question

3. Firms sometimes ignore the total cost of ownership for which reasons? A. Some firms use metrics promoting lower unit costs B. Lower unit costs will provide greater economies of scale C. Ordering costs are minimal with e-procurement D. Tooling costs are always the same regardless of which supplier you use

4. Which of the following is a reason to outsource (buy) a product instead of making it within the firm? A. The product is proprietary technology developed by your firm B. Better quality control C. Strategic benefits of using best-in-class suppliers D. None of these

Explanation / Answer

Firms sometimes ignor the Total cost of ownership for the reason that the ordering cost is lower with the e-procurement

The adavantages of the e -procurement is that they reduce the offering cost, cost of procuring the material, supply cost, delivery cost etc. So if the total cost of ownership is reduced with the ordering cost minimization. This because the electronic form of purchase takes less time and more cost effective which would balance the total cost. Hence the correct option is C.

4. The reason for outsource the product instead of making it are as follows

1. To reduce the cost i.e. operational and Lobour cost.

2. To focus on their core business.

3. To enhance the global knowledge.

4. In order to mitigate risk.

There may be the another reason that they want to use the strategies of best in class suppliers. So, the correct answer is C.

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