CPSM 1B4 : Performing Cost/Benefit Analyses on Acquisitions

Are you reviewing to become a Certified Professional in Supply Chain Management? Then, you should focus your attention in reviewing for CPSM 1B4 because it covers a large section of 20 pages with 8 questions in CPSM Exam 1. This section is worth the effort of studying detail by detail because of the gravity of its points and it speaks to the central purpose of traditional purchasing manager’s role in companies.



The leaders of companies ask the supply leader about the costs of organizations thus, it is essential to be clear about the topics of CPSM 1B4: Performing Cost/Benefit Analyses on Acquisitions.

There are several topics in CPSM 1B4, but this article would only focus on indirect costs and target costs.

Indirect Cost

Indirect costs are those expenses that are not specifically identified with the supplied item being referred to. Hence, in the event that you purchase packaging material you need to remember that you have officially put resources to a specific packaging gear. The investment and depreciation of the machine is fixed cost and you can’t do much about them. The electricity and work utilized on the packaging machine varies with the amount the packaging line is used.

Why would it be a good idea for you to think about indirect cost of equipment if your main job is to purchase packaging material?

More often you find that your supplier choices gets restricted when your supplies can do just a few things. As you get an idea and understanding on the packaging material business sector, you get more educated about newer types of supplies that are friendlier to the environment.

Target Costs

Target Costs is the fascinating concept of arriving at a target cost for raw materials, components particularly for new products. Let us say that your organization has figured out that a new product can be sold at $1 a pack given consumer feedback, competitive offerings and projected sales volumes.

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