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SCMN 3730 EXAM 2 ACTUAL EXAM GUIDE 2025|BRAND NEW EXAM QUESTIONS AND CORRECT ANSWERS ALL GRADED A+|GUARANTEED SUCCESS|LATEST UPDATE FOR $15.49
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SCMN 3730 EXAM 2 ACTUAL EXAM GUIDE 2025|BRAND NEW EXAM QUESTIONS AND CORRECT ANSWERS ALL GRADED A+|GUARANTEED SUCCESS|LATEST UPDATE FOR
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SCMN 3730
Institution
SCMN 3730
SCMN 3730 EXAM 2 ACTUAL EXAM GUIDE 2025|BRAND NEW EXAM QUESTIONS AND CORRECT ANSWERS ALL GRADED A+|GUARANTEED SUCCESS|LATEST UPDATE FOR
Obstacles of complete contracts - ANSWER-- high transaction costs
- high enforcement (or verification) costs
Principle-agent problem - ANSWER-When...
SCMN 3730 EXAM 2 ACTUAL EXAM
GUIDE 2025|BRAND NEW EXAM
QUESTIONS AND CORRECT ANSWERS
ALL GRADED A+|GUARANTEED
SUCCESS|LATEST UPDATE FOR 2024-
2025
Obstacles of complete contracts - ANSWER-✅- high transaction costs
- high enforcement (or verification) costs
Principle-agent problem - ANSWER-✅When the agent (worker or manager) doesn't
act in the best interest of the principle (owner).
Principal - ANSWER-✅Person whom the action affects
Agent - ANSWER-✅Person who acts
Agency Relationship - ANSWER-✅One person's welfare depends on what another
person does
Firm-Fixed Price Contract - ANSWER-✅-Price stated does not change
-Most basic and easiest contractual mechanism
-Supplier bears financial risk in a risking market
-Buyer assumes financial risk in a declining market
Fixed-Price with Escalation Contact - ANSWER-✅-Used for longer-term contacts
where costs are likely to increase
-Escalation clauses allow either price increase or decrease
-Should be tied to an independent, published third-party index
Fixed-Price with Redetermination Contract - ANSWER-✅-Used when parties cannot
accurately predict costs and quantities
-Base price is determined using "best guess" estimates
,-At a predetermined future time, buyer and seller review actual experience and
adjust price
Fixed-Price with Incentitives - ANSWER-✅-Terms and conditions allow cost-savings
sharing with supplier
-Similar to fixed-price with redetermination contract
-Typically utilized under conditions of high unit cost and relatively long lead times
Cost Plus Incentive Fee Contact - ANSWER-✅-Similar to fixed-price plus incentive
except incentive is based on changes in allowable costs
-May include cost-savings sharing at a predetermined rate
-Appropriate when parties are confident of initial target cost
Cost-Sharing Contract - ANSWER-✅-Costs are shared between parties on a
predetermined basis
-Key is identification of operating guidelines, goals, and objectives
-Need to spell out expectations clearly
Time and Materials Contract - ANSWER-✅-Generally used in plant and equipment
maintenance agreements
-Costs cannot be determined prior to the actual repair
-Based on an agreed upon labor rate
-Requires a "not to exceed" amount
Cost Plus Fixed-Fee - ANSWER-✅-Supplier receives reimbursement for all allowable
costs up to a predetermined amount, plus a fixed fee
-Fixed fee represents a percentage of the targeted cost
-Supplier is guaranteed a minimal level of profit
-Little motivation to control costs
Types of Fixed Price Contracts - ANSWER-✅- Firm fixed price
- Fixed-price contract with escalation
- Fixed-price contract with redetermination
- Fixed-price contract with incentives
Types of Cost Based Contracts - ANSWER-✅-cost plus incentive fee
-cost sharing
-time and materials contract
-cost plus fixed fee
Benefits of fixed-price contracts - ANSWER-✅-Easiest contractual mechanism
-Predictable scenario
-Stability for both parties
-Easy to budget for
Limitations of cost-based contracts - ANSWER-✅-Buyer is more exposed to risk and
uncertainty
, -No incentive for supplier to be efficient
-Difficult to budget for
Limitations of fixed-price contracts - ANSWER-✅-Can have a higher costs
-Supplier bears financial risk in a rising market
-Buyer assumes financial risk in a declining market
-More problematic if there are market changes
Benefits of cost-based contracts - ANSWER-✅-Can lead to better quality as suppliers
are not encouraged to cut corners
-Supplier is less exposed to risk
-Necessary if too much risk is involved for suppliers
Spot contracts - ANSWER-✅-Those purchases that are made on a nonrecurring or
limited basis
-Generally a one -time purchase, that can recur but is repriced every time
Short-term contracts - ANSWER-✅-Contract purchases that are routinely made over
a relatively limited time horizon
-can have automatic pricing update or automatic rollover
Long-term contracts - ANSWER-✅-Made on a continuing basis for specified or
indefinite period (often >1 year)
-Can be a futures contract with a set price or have automatic price adjustments at
specific periods
Means of Settling Disputes - ANSWER-✅Legal Action
Non-Legal Action
-Arbitration
-Mediation
-Mini-trail
-Third Party Judgement
-Dispute prevention
Arbitration - ANSWER-✅Use of an impartial third party to resolve a contractual
dispute
Mediation - ANSWER-✅Intervention by a third party to promote settlement,
reconciliation, or compromise between parties
Mini-trial - ANSWER-✅An exchange of information between managers in each
organization, followed by negotiation
Third Party Judgement - ANSWER-✅A neutral party conducts a "trail" between the
parties and is responsible for the final judgment
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