A cost breakdown analysis is a four$-$step process comprising data collection, systematic expansion of the cost elements, determination of the cost drivers and the development of insights. Why is this analysis critical to supplier development?

The conclusion is found in the facts and information considered and analyzed by the buyer.

Where an item has an established market price, verification of an equal or lower price also establishes the price to be fair and reasonable.

The knowledge gathered during the process enables companies to identify a supplier's strengths and weaknesses.

The reasonableness of the cost can be checked against other purchases.