Cost and Price Analysis

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Cost and Price Analysis

Instructor:Name:
Class:Finance 230Date:
Period:Results:

1)Why is it important for the government to exercise good fiscal judgment when spending funds? Government employees are held responsible for use of good judgment so those excessive prices are not paid.

2)List and describe four types of market based pricing. Be sure to provide at least one (1) example of each type. Competitive Offers – response to solicitation encouraging competing offers Established Catalog Price – Published by the seller in a regularly maintained catalog or price list Established Market Price – substantiated from sources independent of the seller: and are current sales prices established in the normal course of trade between buyers and sellers free to bargain in the market place. Established by Law or Regulation – customers are consistently impacted by the established prices.

3)List 3 reasons that government buyers have significant advantages in getting fair and reasonable prices. The government is the only buyer – which has a strong negotiating position on pricing. High volume purchase – suppliers like to deal with high volume buyers and are inclined to give better prices to such buyers. Anit-Deficiency Act - requires the government agencies have the money to pay for the contract work before signing the contract.

4)Compare and contrast cost, price and profit.
Price refers to the amount of money that consumers have to give up to acquire goods or service. Profit is what ever monetary amount is left after all cost has been paid.

5)List and explain the two acceptable procedures for obtaining competitive prices. Sealed Bidding - A process by which government needs are made known by a solicitation called and Invitation for Bids (IFB). Negotiation is the contracting method that ma be used when sealed bidding is inappropriate. Competitive Proposals A process by which government needs are made known by a solicitation called a Request for Quotation (RFQ)

6)Compare and contrast cost and financial accounting. List two (2) examples each of conditions that warrant the use of cost and financial accounting procedures. Cost accounting – is a procedure which enables firms to keep track of the costs that apply to each individual contract or major task they under take.

Ex cost acct. – estimate the cost of work before actually undertaking it.

Financial accounting – is the accumulation of information that enables the firm to know how much total cost and profit they made in a particular period of time. Ex.

7)What are the three major classifications of costs?
Reasonable, allowable, and allocable cost
Variable fixed, and semi-variable cost
Direct and indirect cost

8)Compare direct and indirect costs.
Direct cost – direct labor, direct materials, and some other costs specifically associated with particular contracts are classified as direct costs. Indirect cost – are any cost that are not direct. Cost that apply across the board to large parts not conveniently chargeable to one particular contract.

How does the government contracting officer ensure the costs are reasonable, allowable and allocable? Reasonable Cost – in its nature and amount, it does not exceed that which would be incurred by a prudent person in the conduct of a competitive business.

Allowable Cost – allowability of a particular cost under cost principles must be determine using FAR Part 3. Each principle is based on laws and policies. The decision for determing allowable of a particular cost rest with the Contracting Officer. Allocable Costs – alloacable if I is assignable or chargeable to one or more cost objectives on the basis of relative benefits received or other equitable relationship.

9)When may certified cost or pricing data be required?
The head of an agency shall require offerors, contractors, and subcontractors to make cost or pricing data available as follows: An offeror for a prime...
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