Understanding supplier’s mark-up and margin can provide procurement professional a comprehensive insight into supplier’s net profits. Is this statement true?

Understanding supplier’s mark-up and margin can provide procurement professional a comprehensive insight into supplier’s net profits. Is this statement true?
A . Yes, because supplier’s mark-up and margin are two most valuable sources of information to procurement
B . No, because mark-up and margin inform little about supplier’s net profit
C . No, because margin is enough to tell procurement about supplier’s profitability
D . Yes, because these are two indicators of supplier’s future prospect

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Answer: B

Explanation:

Mark-up and margin allow supplier to make gross profit. Remember that every supplier operates under different cost structures and some are set up to be most profitableat a particular level of volume, so it is dangerous to assume all suppliers can survive on a lower margin if their volume increases. Intelligent buyers understand that mark-up and margin may define gross profits, but they tell you very little about a supplier’s net profits. LO 2, AC 2.1