In a detailed cost breakdown, a company has a salary cost of 9%, raw materials cost 51% and overheads cost
24%. Which of the following represents themark-up of that company?

• A.Approximately 84%
• B.Approximately 19%
• C.Approximately 116%
• D.Approximately 16%

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If the price of a good is above the equilibrium price, which of the following will happen?

• A.The quantity demanded is equal to the quantity supplied and the price remains unchanged
• B.There is a shortage (i.e. an excess demand) and the price will fall
• C.There is a surplus (i.e. an excess supply) and the price will rise
• D.There is a surplus (i.e. an excess supply) and the price will fall

Correct Answer: D

In microeconomics, equilibrium price is determined when the quantity demanded is equal to thequantity supplied at equilibrium price in a market, there will be no shortages and no surpluses. If we combine our supply and demand curves on one graph, the point at which they converge determines the equilibrium price. If the price is set above this price and you read across the graph you will see the supply excess demand and there will be a surplus. In order to reduce this surplus, the price will need to fall. The scenario is illustrated in the graph below:
Chart, line chart Description automatically generated

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IHL has beensupplying to XYZ Ltd for months. XYZ Ltd procurement manager Diana realises that the IHL's input prices are dropping and this is a good time to re-negotiate the price of the contract. She invites IHL representative to XYZ headquarter to make a bargain on the current price. At the opening stage of the negotiation, Diana requests a 10% reduction in price with an increase in volume purchased.
Is Diana's action appropriate in the opening phase?

• A.Yes, because the negotiation should be done as quick as possible
• B.Yes, because Diana's proposal is a fair trade for both parties
• C.No, because Diana should state exactly the increasing quantity
• D.No, because Diana has put the markers down too soon

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A procurement professional is preparing for anegotiation with supplier. She is setting targets for price which her company is seeking to achieve. Which of the following acronyms can help her identify limits before engaging in the negotiation?

• A.MIL
• B.RAQSCI
• C.TIMWOOD
• D.PPCA

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Procurement team is required to improve leverage with their suppliers through spend consolidation. To check whether there is any opportunity to consolidate spend, which of the following should be priority of procurement team?

• A.Spend analysis
• B.Value engineering
• C.Price analysis
• D.Total cost analysis

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