Cost Reduction occurs when:

Cost Reduction occurs when:

• A. The current price paid is lower than the previous price paid under similar procurement conditions
• B. The current price paid is higher than the previous price paid under similar procurement conditions
• C. The price is the same as the previous price
• D. The price is unpredictable

Answer: (A)

Cost reduction occurs when the price paid for a purchase is lower than the price paid for a previous, comparable procurement under similar conditions. This shows that you’ve achieved savings on the same item or service without changing the essential terms. If the price is higher or the same, or if price fluctuations are unpredictable, you haven’t demonstrated a reduction in cost. Cost reductions can come from better supplier terms, negotiated discounts, improved procurement processes, or more favorable market conditions, but the defining signal is that the current price is lower than what you previously paid for a like transaction.

Cost reduction occurs when the price paid for a purchase is lower than the price paid for a previous, comparable procurement under similar conditions. This shows that you’ve achieved savings on the same item or service without changing the essential terms. If the price is higher or the same, or if price fluctuations are unpredictable, you haven’t demonstrated a reduction in cost. Cost reductions can come from better supplier terms, negotiated discounts, improved procurement processes, or more favorable market conditions, but the defining signal is that the current price is lower than what you previously paid for a like transaction.