How Cost Factors Are Calculated

Cost factors allow a buyer to identify and control for additional costs associated with a negotiation line. You can add cost factors to lines in a negotiation document, to line defaults in a negotiation template, or to cost factor lists.

How Cost Factors Are Calculated

Cost factors can be defined as either a per-unit cost, a percentage of the line price, a percentage of response amount, or a fixed amount for both response amount and line. The pricing basis of percentage of response amount is available for internal cost factors only. A single line can have one or more cost factors (of any type) defined for it. All cost factors are added to the line price (the price being offered by the supplier per unit) to obtain the response price. The response price is the actual price per unit when all applicable cost factors are applied.

Response price is calculated as follows: line price + ((line price * any percentage of line cost factor) + any per-unit cost factor + (any fixed amount cost factor / response quantity))

Example calculation: This example shows how a supplier's response is adjusted to take into account all the cost factors defined by the buyer. The numbers represent the values entered by the supplier for the line price and all the cost factors.

• Line price = 30

• Percentage of line cost factor = 35

• Per-unit cost factor = 5

• Fixed amount cost factor = 15

• Response quantity = 100

Calculation: 30 + ((30 * 0.35) + 5 + (15/100)) = $45.65 (response price)