Expert answer:Need help with BUS 315 Cost and Price Analysis Wee
Answer & Explanation:”Price Analysis” Please respond to the following:Examine at least two purposes that price analysis serves to a company like VectorCal and to its product line. Support your answer with two (2) examples of companies that used price analysis to better serve their organizations.Imagine you are a CEO of a large company. Provide two examples of the manner in which you would incorporate a price analysis in your company. Predict the important ways in which your use of price analysis would lead to financial success for the whole company.Week 3 eActivityRead the article titled “The Fundamentals of Price and Cost Analyses,” located at http://www.thomasnet.com/articles/engineering-consulting/price-cost-analysis, and take note of “An Overview of Price Analysis”. Be prepared to discuss.bus315_week_3_scenario_script_9_24_13_revised.docxbus315_w3_p1.pptx
bus315_week_3_scenario_script_9_24_13_revised.docx
bus315_w3_p1.pptx
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BUS315 Week 3 Scenario Script: Price Analysis
Slide #
Topics
Slide 1
Scene 1
Narration
Semi-large building
(VectorCal) and have avatar
inserted to represent her
entering the building
Slide 2
Scene 2
Dominic: Good morning Sally!
Introduction to the week
How did everything work out with your job
shadowing of Melissa?
Takes place in Dominic’s
office
Sally: Good morning to you too! Last week was
amazing! Melissa was great! She showed me
what her department is all about and really
solidified my knowledge of government
contracting.
Dominic: That is fantastic, Sally! I’m glad that
this internship is really opening your eyes to not
only what VectorCal does but also how the
industry functions as a whole.
This week I will have you working with Jake and
his department. I think this will be a great
learning experience for you, and will really give
you another in-depth look at our day-to-day
operations.
Slide 3
Dominic then leads Sally
down the hallway to Jake’s
office
Sally: That sounds great! I’m excited to get
started!
Scene 3
Dominic: Good morning Jake! I have brought
Sally here to work with you for the week. Could
you show her around and provide her with a
better understanding of what your department
accomplishes?
Jake’s office to go over key
concepts related to
government contracting
Jake: Sure thing, Dominic! I have a list of tasks
for Sally.
Dominic: That is fantastic! Thank you Jake!
Dominic leaves
Sally, I will talk with you later about how
everything went while you were here.
Take care!
Sally: Thank you both! It’s nice to meet you again
Jake! I am really excited to begin learning about
the production process at VectorCal.
Jake: It’s my pleasure to be working with you,
Sally! So before we begin, are there any questions
you would like for me to answer?
Sally: Well, I know you deal with the production
of VectorCal’s navigation systems. The only real
question I have is how do you run a price
analysis for these navigation systems? I
remember something about the price analysis
being very important in the production phase
from some business classes I took at Strayer
University.
Jake: I’m glad you remembered that information.
You are correct.The price analysis is very
important during the production phase. You are in
luck, because I have a new approach to explaining
how we establish all of our price points for our
products.
Let’s get started!
Slide 4
Scene 4
Jake’s office to go over key
concepts related to price
analysis in productions
Jake: I just moved all of my presentations to the
new tablets all managers received last week.
Please take a tablet and follow alongas we go
over some key parts of this presentation. Keep in
mind that if you want to share something, these
tablets can be hooked up to a projector to
highlight things you find interesting.
Sally: These tablets are really nice, and I will
definitely take you up on showcasing my findings
on the projector. I’m actually checking out the
section on price analysis right now.
Jake: Fantastic! What can you tell me about a
price analysis?
Projector screen showcasing
key items
Sally: Well a price analysis is a set of methods
for determining whether an asking price is
reasonable without examining the details of the
cost or profit included in the price. I think this
means that every time we make a purchase, we
consciously or unconsciously make a price
analysis, which satisfies us that what we are
paying is reasonable.
Jake: That is very important information to keep
in mind. I’m glad you shared that with me. I will
now explain the governmental aspect of the
price analysis.
We see that the government does a significant
amount of contracting based on price alone, with
no information on how much cost and
profitareincluded in the price. Setting up a
contract this wayoften results in the awarding of a
fixed-price type contract.
What do you think happens when a government
agency needs to acquire various products and
services?
Sally: I think that the agency must forecast the
price of those products and services in its budget
and convince the reviewing authorities that the
forecast is reasonable. I recall that once the funds
are appropriated, the agency is in a position to
actually buy the products and services.
Jake: That was a great response, and you are
absolutely correct! I do have one more thing to
add. Keep in mind that the bids, price proposals,
and quotes received by the government in
response to solicitations and requests for
quotations must all be evaluated for price
reasonableness.
Sally: I will definitely keep that in mind moving
forward. What else can you tell me about a price
analysis?
Jake: I have plenty more to share with you about
this topic! Let’s continue our discussion by
moving ahead in our tablet presentation a little
bit.
Slide 5
Scene 5
Jake’s office to go over key
concepts related to price
analysis in productions
Projector screen showcasing
key items
Jake: It is important to understand that a price
analysis must be completed when selecting a
contractor for the awarding of a firm-fixed-price
or a fixed-price-withaneconomicadjustment
contract. When the government commits itself to
a contract signature to pay a price, there isn’t an
opportunity to amend the price unless the
contract work is changed.
Sally: That is very good to know! How do
companies like VectorCal negotiate prices with
the government?
Jake: Well, here at VectorCalwe use negotiations
to reach a fixed-price type contract. We normally
hold discussions on the pricing and technical
aspects of each offer in the competitive range.
We have noticed, however, that regardless of the
size of the acquisition, the detailed cost and
pricing data are not sought if a determination is
made that the awarding of a contract will be based
on adequate competition. For particular cases like
this, we will use a price analysis to assess the
reasonableness of each proposed price.
Sally: That makes a lot of sense now. Thanks for
explaining that to me!
Jake: Not a problem at all. We will now look at a
number of methods for conducting a price
analysis.
Let’s begin!
Slide 6
Scene 6
Jake’s office to go over key
concepts related to price
analysis in productions
Projector screen showcasing
key items
Jake: The first method of conducting a price
analysis is to do a comparison of the proposed
prices received in response to the solicitation.
This method usually consists of comparing
offered prices against each other in order to
decide which prices are most reasonable. We find
that the offered prices are fairly close together,
but are not the same,if adequate price
competition has occurred.
Sally: Shouldn’t we be careful when using
comparisons with other prices offered as the only
price analysis method?
Jake: Right you are! When there is an extremely
low price that is compared to others,this may
indicate that the bidder did not fully understand
the requirements or therewas a mistake made.
Sally: I think I know another method that could
be used! I’m looking at my tablet now; let me
share what I have found on the projector.
Another method of conducting a price analysis is
a comparison of prior prices paid. The
presentation on my tablet says that this method is
useful when the agency has had a history of
contracting for the same products or services. It
also says that there are several factors that must
be considered, such as:
Reasonableness of the base price;
Time since the last buy;
Relative number of quantities sold;
Whether we are dealing with a special production
item or a shelf item; and
Acquisition methods used.
Jake: Great job Sally, and thanks for showing me
that method!
Let me tell you about a third price analysis
method,which deals with the comparison of
prior quotes. This method is very similar to
comparing a present offer to the prior prices paid
for the same item. However, this method
willcompare the present asking price to the prior
quotes, and not just the price paid.
Sally: There are two other methods listed on this
tablet presentation. Can I show you the fourth
method?
Jake: Sure! After that, I will cover the last
method of conducting the price analysis.
Sally: The fourth method of conducting a price
analysis is to do a comparison of prices paid for
similar items. I recall that this method is similar
to the one you previously discussed, except now
we have the added complication of comparing
something similar rather than the same. It seems
that this can be a very imprecise method to use if
you are comparing the prices paid from several
months or over a year ago. However, it seems
that this method may be more precise if you are
comparing the price you paid recently for a
similar item. I think the level of precision depends
on how accurately one can estimate the price
change related to the differences in design.
Jake: Very good Sally! This method can be tricky
if not done correctly. Now let’s look at the final
method we can use.
Jake: The last method that can be used to conduct
a price analysis is the use of estimating
relationships. We see that federal acquisition
regulations refer to this method as the use of
“rough yard sticks”. Keep in mind that
estimating relationshipsrefer to measures such
as dollars per pound for finished products and
dollars per square foot for finished construction.
The downfall of this method is that you need to
continually update estimating relationships so that
they will retain their usefulness. These
relationships need to be updated in order to reflect
the prices as they gradually change. We see that
many agencies experienced in buying complex
items may develop rough yardsticks for use in
estimating prices, determining price
reasonableness, or detecting significant variations
from estimates which justify further checking.
Sally: That is very interesting! I think I definitely
have a better feel for the various methods of
conducting a price analysis.
Jake: That is great Sally! Please let me know if
you have any other questions.
Slide 7
Scene 7
Jake’s office to go over key
concepts related to price
analysis in productions
Projector screen showcasing
key items
Sally: Now that you mention it, I do have one
more question. I remember from one of my
Strayer business classes that there were two other
approaches to conducting a price analysis. Could
you refresh my memory?
Jake: Well, you are right – there are two other
approaches that can be taken. The first approach
deals with the concept of a value analysis, which
can give insight into the relative worth of a
product. The government may use this approach
in conjunction with other price analysis
techniques. The major premise behind this
approach is to learn why prices are different for
products of the same basic type and whether they
are worth the difference.
Sally: Thanks for reviewing that with me. I think
I remember what the second approach is now!
I recall that the second technique is visual
analysis. This concept deals with looking at an
item and using our experiences to estimate its
value. I remember that this is particularly useful
when making small purchases for repair parts and
accessories, especially when they are only
available from one known source.
Jake: That is correct – great job, Sally! There is
one more thing I want to share with you. Keep in
mind that federal acquisition regulations identify
two preferred techniques as the best ways to
completea price analysis. One technique is to do a
comparison of proposed prices received in
response to the solicitation. The second
technique then deals with a comparison of prior
proposed prices and contract prices with
current proposed prices for the same or similar
items.
Sally: Jake, thank you for all of the details about
how your department makes decisions on how to
price contracts with the U.S. Government and
General Atomics. You have really expanded my
knowledge, and your tablet presentation really
helped me gain a better grasp on several key
pricing analysis concepts.
Jake: It was my pleasure, but keep in mind that
there is a lot more that goes into these decisions.
We will save that for another day though!
I would now like for you to go through some
interactive training materials to help build upon
some key concepts from today’s lesson.
Slide 8
Scene 8
Tab interaction that will have
audio for each tab.
Users will click each item and
be greeted with images and
narration.
Jake-A price analysis is a set of methods for
determining whether an asking price is reasonable
without examining the details of the cost or profit
included in the price.
Jake-A comparison of proposed prices received
in response to the solicitation is a method of
comparing offered prices to each other to decide
which are reasonable. As a general rule, we
would expect offered prices to be fairly close
together, but not the same, if adequate price
competition has occurred.
Jake A comparison of prior prices paid is a
method that is useful when the agency has had a
history of contracting for the same products or
services. Several factors must be considered,
including the reasonableness of the base price,
time since the last buy, the relative number of
quantities sold, whether we are dealing with a
special production item or a shelf item, and the
acquisition methods used.
Jake-A comparison to prior quotes is a method
that is similar to comparing a present offer to
prior prices paid for the same item. However, it
compares the present asking price to the prior
quotes, not just the price paid.
Jake-A price paid for similar items comparison
is amethod similar to comparing prior
quotesexcept now we have the added
complication of comparing something similar
rather than the same. Comparing with prices paid
for similar items in the past is a very imprecise
method if you are comparing with prices paid
several months or a year ago. However, this
method may be precise if you are comparing to
the price you paid very recently for a similar item.
The level of precision depends on how accurately
you can estimate the price change related to the
differences in design.
Jake-Estimating relationships are measures
such as dollars per pound for finished products
and dollars per square foot for finished
construction. But you need to continually update
estimating relationships so they will retain their
usefulness. Relationships need to be updated to
reflect prices as they gradually change.
Slide 9
Scene 9
Check Your Understanding
Drag and Drop with key
concepts from this week’s
lesson:
•
•
•
•
•
Price analysis
Value analysis
Visual analysis
Estimating
relationships
Comparison of prior
prices paid method
Price analysis is a set of
methods for determining
whether an asking price is
reasonable without examining
the details of the cost or profit
included in the price.
Value analysis can give
insight into the relative worth
of a product. The major
premise behind this approach
is to learn why prices are
different for products of the
same basic type and whether
they are worth the difference.
Visual analysis deals with
looking at an item and using
our experiences to estimate its
value.
Estimating relationships are
measures such as dollars per
pound for finished products
and dollars per square foot for
finished construction.
A comparison of prior
prices paid is a method that is
useful when the agency has
had a history of contracting
for the same products or
services. Several factors must
be considered, including the
reasonableness of the base
price, time since the last buy,
the relative number of
quantities sold, whether we
are dealing with a special
production item or a shelf
item, and the acquisition
methods used.
Correct Feedback: You have
correctly identified each term
with its correct definition.
Incorrect feedback: One or
more of the answers selected
are incorrect. Please go back
through the scenario to review
each concept to help you
make the right choice.
Slide 10
Scene 10
Conference room with Jake to
go over the week’s key points
Jake: Great job on the training materials. I really
hope they helped to solidify all of the concepts we
discussed today.
Let’s now summarize what we discussed during
our time together:
First, we defined price analysis as a set of
methods for determining whether an asking price
is reasonable without examining the details of the
cost or profit included in the price.
Do you remember what the purpose of a price
analysis is?
Sally: I recall that a price analysis has a purpose
of forecasting the likely price of an
acquisition;evaluating bids, proposals and
quotations;selecting the bidder or offer for
award;and helping in the preparation of the price
discussion during a negotiation.
Jake: Very good Sally! We then examined five
different methods of conducting a price
analysis, and took a closer look at each method.
Sally: I really liked the presentation you used
while we went over these concepts. It really
helped me organize all of the information you
were giving me, and allowed me to better
understand each method.
Jake: Well, thank you Sally, I will try to follow
this format moving forward when I work with you
again. Do you recall from our discussion the two
auxiliary techniques for a price analysis?
Sally: I sure do! The first technique was called a
value analysis, and I learned that this technique
can give insight into the relative worth of a
product. The second technique I learned about
was a visual analysis. I saw that this technique
consisted of looking at an item and using our past
experiences to estimate its value.
Jake: Good work! The last thing I talked with you
about was the preferred methods used by the
federal government. We saw that one
techniqueinvolves completing a comparison of
proposed prices received in response to the
solicitation,while the second technique deals with
a comparison of prior proposed prices and
contract prices with current proposed prices for
the same or similar items.
Sally: Thanks for the review, Jake! You were
very helpful this week and I learned so much! I
really feel like I gained a better understanding of
not only what your department does here at
VectorCal, but also how the industry functions in
the production phases of products.
Jake: It has been my pleasure working with you
this week, Sally. I look forward to working with
you again and showing you other key aspects of
my department.
Until then, don’t forget to complete your weekly
discussion questions based on your learning
experiences this week.
Have a good rest of the day and I will see you
soon!
Sally: You too, Jake, and thank you again for
having me in your department this week.I truly
appreciate it!
Cost and Price Analysis
BUS 315
Price Analysis
Topics
• To cover this objective, we will discuss the
following topics:
– Price analysis
– Purposes of price analysis
Price Analysis
• Definition
– Determining price reasonableness without
examining details of cost or profit
• Results in fixed-price contract
Purposes of Price Analysis
• Forecasting the likely price of an
acquisition
• Evaluating bids, proposals, and quotations
• Selecting the bidder or offeror for award
• Preparing the price discussion in
negotiation
Check Your Understanding
Summary
• Price analysis
• Purposes of price analysis
…
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