Exam CSCP topic 1 question 659 discussion

Actual exam question from APICS's CSCP

Question #: 659
Topic #: 1

A firm that is experiencing a supply constraint for a fast-selling product determines that a reason for the constraint is the investment required to expand capacity. Which of the following types of contracts would be most appropriate for the firm to offer the supplier to increase output?

A. Cost sharing
B. Revenue sharing
C. Buyback
D. Joint venture

Show Suggested Answer

Suggested Answer: A 🗳️

by CSPark000 at June 15, 2023, 7:45 a.m.

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kevinjjjj

3 months, 3 weeks ago

Selected Answer: A

The most appropriate contract for the firm to offer the supplier is A. Cost sharing. Explanation: Cost sharing incentivizes the supplier to increase output by splitting the investment costs associated with capacity expansion. The firm would agree to contribute a portion of the expansion costs, encouraging the supplier to undertake the necessary upgrades to meet the increased demand. This arrangement benefits both parties as the firm gains access to more of the fast-selling product, and the supplier receives financial assistance to expand their production capabilities.

upvoted 1 times

kevinjjjj

3 months, 3 weeks ago

Joint venture: A joint venture involves two or more entities forming a new company to undertake a specific project. While this can be beneficial for long-term collaborations and shared ownership, it might be too complex and time-consuming for addressing the immediate supply constraint. Given the need for a quick capacity expansion, a simpler contract like cost sharing would be more appropriate.

upvoted 1 times

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Rajiv8047

7 months, 1 week ago

Selected Answer: A

cost-sharing contract, the buyer and supplier agree to share the costs of expanding the supplier's capacity. This type of contract is well-suited to situations where the buyer is experiencing a supply constraint for a fast-selling product and the supplier is hesitant to invest in expanding capacity due to the financial risk involved.

upvoted 1 times

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Daesma

11 months, 3 weeks ago

Selected Answer: A

The company can offer to share the costs of expanding production capacity, which may allow the supplier to increase production without assuming all the financial risk associated with the investment.

upvoted 2 times

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CSPark000

1 year ago

Selected Answer: D

Why not D ?

upvoted 3 times

Ayenco

5 months, 3 weeks ago

Is D not too involving and complex for capacity expansion?

upvoted 1 times

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