Question 1:

Skipped
XTC is a tile manufacturing company which gained competitive advantage
by incurring the lowest production cost within the industry. which strategy
was most likely applied by XTC?

cost reduction

differentiation

cost focus

cost leadership

Explanation
Cost leadership refers to the cost of production being the lowest. pg. 63

A cost focus strategy is when an organization tries to attract potential

customers solely based on pricing

Differentiation focus on the uniqueness of the brand or product.

Question 2:
Skipped
What are the sources of information that can be used to create
specification?

Standards

Sketches


notes

details
Question 3:
Skipped
A document issued by a buyer to a seller with details of goods or services
required is known as;

Requisition

Request for quotation

Purchase order

Specification
Explanation
A requisition is a request for goods or services made by an employee to
the person or department in a company that is responsible for purchasing.

A Request For Quotation (RFQ) is a competitive bid document used when

inviting suppliers or contractors to submit a price bid for products or
services to be procured.

Question 4:
Skipped
HTC Holdings is conducting a systematic process for improving value of
products and services and identifying cost reduction opportunities by
optimizing the components used. which of the following best defines the
process outlined above?


business process modelling

value analysis

business process re-engineering

value-chain analysis
Explanation
Value analysis is a systematic review of the production, purchasing and
product design processes to reduce overall product costs.

pg. 160

Question 5:
Skipped
Which of the following might lead to a modified re-buy for a regularly
purchased item? Select TWO that apply

New product

An increase in the rate of use

Price adjustment clause

Buyer dissatisfaction


Change in product regulations

Question 6:
Skipped
Standardization of processes is a must-have for high performing supply
chains. which of the following are benefits of Standardization? select TWO
that apply

Faster turnaround of goods

Reduced resource waste

increased product variations

multiple production processes of items

Explanation
Standardization eliminates product variations and also consolidates or
selects the best production process for similar products thus leading to
faster turnaround of goods and reduced resource waste.
Question 7:
Skipped
Joe Son is an IT manager at BMC. he advised the procurement team to
include ISO 27001 standard as part of specification for procurement of an
information system which captures and stores transactional data as well
as BMC's customer information. is ISO 27001 standard necessary in the
development of secure information systems?

No, ISO 27001 is a standard for environmental management



Yes, because ISO 27001 is for information security

management

Yes, because ISO 27001 guarantees the quality of software

and hardware

No, ISO 27001 is no longer being used

Explanation
ISO 27001 is for IT security, cybersecurity and privacy protection.
Question 8:
Skipped
Which of the following is an ISO standard for governance of organizations?

ISO 14000

ISO 90001

ISO 37000

ISO 28000
Explanation
ISO 14000: environmental management

ISO 28000: security management systems

ISO 90001: Quality management

Question 9:
Skipped
A tool used to convert customers expectations into potential solutions and
then evaluates them to choose the best one is referred to as?

Customer opinion review

Sentimental analysis

Requirements gathering

Pugh analysis

Question 10:
Skipped
Types of performance specification are: ? select THREE that apply

input specifications

functional requirements specification

output specification


statement of work specification

outcome specifications

Explanation
three major types of performance specification are outcome, output and
statement of work specification. pg. 120
Question 11:
Skipped
A financial indicator which compares a company's owner equity with funds
borrowed is known as?

Gearing ratio

Debt-to-equity ratio

Current ratio

Gross margin ratio

Explanation
The current ratio measures a company’s ability to pay off short-term
liabilities with current assets:

Current ratio = Current assets / Current liabilities

The Debt-to-equity ratio calculates the weight of total debt and financial
liabilities against shareholders’ equity:

Debt to equity ratio = Total liabilities / Shareholder’s equity

The Gross margin ration compares the gross profit of a company to its net
sales to show how much profit a company makes after paying its cost of
goods sold:

Gross margin ratio = Gross profit / Net sales

Question 12:
Skipped
A procurement department has asked for a pricing structure that will allow
the supplier to cover their costs plus £10000 to cover the supplier's profit.

cost plus a fixed fee

cost plus an incentive

cost plus percentage fee

cost plus shared incentive

Question 13:
Skipped
Sean Kim is a procurement officer at OTH holdings. he is tasked with
purchasing raw materials for production of apple juice. he looks into a list
of previous suppliers and decides to negotiate the price apples. which
type of purchase did Sean Kim apply?

new buy

Modified re-buy


none of the above

straight re-buy
Question 14:
Skipped
Which of the following are legitimate reasons for change of specification.
select THREE that apply

change in regulations

supplier relocates to the next province or city

death of company's general manager

an update in technology

lack of resources for the contractor

Explanation
death of a company general manager can not result in change of
specifications since he can be replaced by employing a new manager.

relocation of suppliers does not call for termination of contracts unless the
supplier organisation shuts down. pg. 135
Question 15:
Skipped
Suppliers are powerful in which of the following

situations?

1. there are few substitute products

2. products are undifferentiated
3. buyers switching costs are high
4. there are many substitute products

3 and 4 only

1 and 2 only

2 and 4 only

1 and 3 only

Explanation
suppliers are generally weak when their products are not differentiated
and also when there are more substitute products on the market
Question 16:
Skipped
Which of the following defines breakeven point?

Q/(R/V) = F

Q x (R+V) =R

F/(R-V) = Q


F = Q x (R-V)
Explanation
pg. 29
Question 17:
Skipped
Primary data can be Qualitative or Quantitative. Which of the following are
examples of Qualitative data? select TWO that apply.

Number of items delivered per day

Mass of goods produced

Customers attitude towards a particular brand

Public perceptions about about quality of service

Percentage of annual turnover

Explanation
Quantitative data is numbers-based, countable, or
measurable. Qualitative data is interpretation-based, descriptive,
and relating to language
Question 18:
Skipped
Suppliers are powerful in which of the following situations?
1. There are potential for backward integration
2. Products and services are undifferentiated
3. The switching costs for buyer's is high
4. There are few substitute products

1 and 2 only

1 and 3 only

2 and 3 only

3 and 4 only

Question 19:
Skipped
At which stage of product life cycle does sales start to slow down?

maturity

introduction

decline

growth
Explanation
during growth state sales are faster than at any stage but starts to slow
down at maturity. pg. 89
Question 20:
Skipped
Which of the following are primary sources of market data for costs and
prices. Select TWO that apply

published economic indices

supplier marketing communication

industry press

trade fairs

price comparison website

Question 21:
Skipped
Which stage precedes Preparation stage when conducting whole life cycle
costing?

Implementation

Assessment

Cost Modeling


Planning

Question 22:
Skipped
Which of the following sets out justification for undertaking a project?

Specification

Project scope

Business case

Business plan
Explanation
A specification is a detailed and precise requirement.

A business plan is a document that defines in detail an organization's

objectives and how it plans to achieve its goals.

A Project scope is a detailed outline of all aspects of a project

A business case provides justification for undertaking a project by

evaluating the benefits, costs and risks of alternative options.

Question 23:
Skipped
Raheem is the head of procurement at a Care home. He decides to use a
performance specification for the purchase of a new intelligent patient
record IT system. Is this a correct approach?


Yes, as it tells the supplier the exact requirement

No, it will take too long to acquire the IT system

No, the approach is difficult to manage

Yes, as it helps to drive innovation

Question 24:
Skipped
Which of the following are advantages of using standards within a
specification?
1. Remove ambiguity of requirements
2. Assists negotiations with suppliers
3. Assist accurate comparison of bids
4. Increased time of market

2 and 4 only

3 and 4 only

1 and 2 only

1 and 3 only

Question 25:
Skipped
HTC Holdings presented the following financial data in 2010. calculate the
Debt-to-equity ratio
Total Assets = $200 million

Total Debt = $100 million

Total Equity = $100 million

0.5

Explanation
Debt-to-Equity Ratio = Total Debt ÷ Total Equity

Ratio = $100 million / $100 million

Question 26:
Skipped
The buying of an item out of contract when a contract for that item
already exists is known as?

buying off-contract

new-buy


out-of-contract buying

call-off
Explanation
the best answer is buying off-contract because there already exists a
contract for that particular product.
Question 27:
Skipped
Which of the following are threats to substitute in Porter's five forces
model?
1. There is potential for backward integration
2. Products and services are undifferentiated
3. Demand is price sensitive
4. There are low switching costs

1and 4 only

2 and 3 only

1 and 2 only

3 and 4 only

Question 28:
Skipped
Which of the following are Indirect costs. select THREE that apply

Costs of raw materials

Monthly utilities bills



HR managers salary

Production line manager's salary

Warehouse rental

Explanation
Indirect costs extend beyond the expenses incurred when creating a
product; they include the costs involved with maintaining and running a
company. These overhead costs are the ones left over after direct costs
have been computed.

indirect costs are needed for a company’s day-to-day operations rather

than product specific costs.

Question 29:
Skipped
Which of the following would allow an established company to develop a
competitive advantage over new entrants to it's market?

reduced advertising costs

Selling only imported products

price fixing


Economies of scale

Question 30:
Skipped
Which of the following might be the results of under-specification?

reduced production costs

less scope for innovation by suppliers

products that are not fit for purpose

reduced lead-times
Question 31:
Skipped
Buyer power may make a supply market more competitive. Which of the
following are examples of buyer power?

High barriers of entry exists for new suppliers

Collusion between competitor suppliers

Suppliers are limited in number

Ability to easily switch suppliers



Consumer large in size relative to suppliers

Question 32:
Skipped
The expected costs of making a product or delivering service are known
as;

Direct costs

Operational costs

Target costs

Actual Costs
Question 33:
Skipped
Which of the following best describes fixed costs? select TWO that apply

They are determined by the volume of production

They only increase if production volumes increases

They remain constant even if production volumes increases



They are NOT determined by the volume of production

They remain constant if there is less production

Explanation
Fixed Costs are not affected by production levels
Question 34:
Skipped
Which of the following are types of waste?
1. inventory
2. over-production
3. underpricing
4. over-specification

2 and 3 only

3 and 4 only

1 and 3 only

1 and 2 only

Explanation
the seven wastes described in Lean are; Defects, waiting, over-production,
Motion, Inventory, over-processing and transport and handling.

pg. 156
Question 35:
Skipped
John has been asked to develop a business case before obtaining approval
to purchase a large piece of capital equipment for a glove manufacturing
unit. Is this the right thing to do?

No because this consideration is not Responsibility

Yes because this will help compare alternatives and options

Yes because this will assist the purchase order

No because this can lead to business focus thinking

Explanation
a business justifies the undertaking of a project by comparing alternatives
and options as well as potential risks
Question 36:
Skipped
Which of the following entails the process of identifying and approving
changes to a specification?
1. monitor the change
2. control the change
3. describe the change
4. review the change
5. final approval

1, 4 and 5 only

3, 4 and 5 only


2, 3 and 4 only

1, 2 and 3 only
Explanation
The process of identifying and approving changes to a specification entails
of the following stages;

describe the change

review the change

look at the options

final approval

pg. 136

Question 37:
Skipped
The role of the marketing function in the development of specifications is?

to coordinate the stakeholders because the procurement

team is less suited for this role

to ensure that the brand name is given precedence over the

technical aspects of the specification

To ensure the organization gains competitive advantage in

the product features


to ensure that the design department is discouraged from
using conformance specification
Question 38:
Skipped
Josh a junior procurement analyst was asked to analyze the cost
breakdown for some of the major

category products that he purchases for the engineering company he

works for. He has looked at

various types of costs and has identified some corrections. Which of the
following do you believe are correct?

1. Direct product costs tend to be variable costs for the organization

2. Indirect product costs tend to be fixed costs for the organization
3. Direct costs are also known as overheads for the organization
4. Indirect costs also known as the marginal costs for the organization

1 and 3 only

2 and 4 only

3 and 4 only

1 and 2 only

Question 39:
Skipped
Buyers bargaining power is weak under which instances? select TWO that
apply

buyers purchase in large volumes


there are no substitutes for the product

buyers are well informed about the products

product is differentiated

Explanation
buyers have a stronger bargaining power if they purchase in large
volumes since they can negotiate for price discounts. well informed
buyers will always know the where to find find substitute products or
where to buy at relatively lower prices. pg. 88
Question 40:
Skipped
Which of the following are commonly used in conjunction with an output-
focused specification?

product brand name

clear conformance standards

key performance indicators

detailed technical requirements

Explanation
output-focused specifications are performance-based hence the need for
KPIs
Question 41:
Skipped
Which of the following market structures has the highest barriers or
highest switching costs?

imperfect competition

duopoly

monopoly

oligopoly
Question 42:
Skipped
In a cost reimbursable contract the buyer is invoiced based on which
costs?

actual costs

variable costs

direct costs

fixed costs
Explanation
only Actual costs are considered in a cost reimbursable contract
Question 43:
Skipped
Comparing what something should have cost with what it has actually
cost is known as?

Opportunity cost analysis

Supplier analysis

Profit and loss analysis

Variance analysis

Question 44:
Skipped
Which of the following are typically found within conformance
specifications? Select TWO that apply.

outcomes

drawings

outputs


samples

functions
Question 45:
Skipped
Which are characteristics of a retail market

threat of substitutes is low

buyers are predominantly companies

competition is usually low

Threat of substitutes is high

Explanation
in a retail market buyers are predominantly individuals, threat of
substitutes is high and competition is usually intense. pg. 78
Question 46:
Skipped
Which are Types of Benchmarking?
1. functional benchmarking
2. operational benchmarking
3. generic benchmarking
4. specific benchmarking
5. external benchmarking

1 and 3 only


1 and 2 only

4 and 5 only

3 and 4 only
Explanation
the four main types of benchmarking are:

internal benchmarking

competitive benchmarking

generic benchmarking

functional benchmarking

Question 47:
Skipped
A new purchase situation is characterized by the following; select THREE
that apply.

More information is needed before the purchase can be

made

An input from different employees from different

departments

The existence of approved suppliers list



The purchase is of relatively low value and high risk

products

Purchase of relatively high value and high risk products

Question 48:
Skipped
A new product development team has been assisted by a procurement
manager, who has already provided the team with information about the
availability of suppliers for a key component. The manager has advised
the team that there are a large number of suitable potential suppliers.
What other factor is it important to consider with regard to competitive
forces in the supply market?

competitive rivalry between suppliers

the bargaining power of buyers

threat of new entrants

impact on the supply chain

Explanation
the procurement manager did not consider the bargaining power of
buyers even though competition rivalry and supplier power was clearly
addressed.
Question 49:
Skipped
Acceptance testing is essentially a validation test. which of the following
are types of acceptance testing? select THREE that apply


Operational acceptance testing

Alpha and beta testing

Black box testing

Regular acceptance testing

Technical testing
Explanation
five main types of acceptance testing are: contract acceptance testing,
contract acceptance testing, black box testing, regulation acceptance
testing and operational acceptance testing.

pg. 134

Question 50:
Skipped
Which are Porter's generic strategies?
1. cost leadership
2. cost focus
3. differentiation
4. cost sharing
5. narrow niche segment


2, 3 and 4 only

1, 2 and 3 only

1, 3 and 5 only

1, 4 and 5 only
Explanation
cost focus and cost sharing are not part of Porter's generic strategies
Question 51:
Skipped
Buyers have more bargaining power when;

product is seasonal and in-season

product is in stock with single supplier

product is in low supply and high demand

product is available from multiple suppliers

Question 52:
Skipped
Tom Hopkins is a procurement manager at TSM Investments. he is in the
process of awarding a contract for the supply of 5 laptops from KTM Inc.
he suggests that warranties must be part of the agreement. was it
important to include a warranty term to the contract?


Yes, because a warranty guarantees that only high quality

laptops will be supplied

No, because warranties usually results in higher purchase

prices

No, because warranties do not guarantee the repair of

exchange of products

Yes, because a warranty guarantees that the supplier with

exchange or rectify malfunctioning laptops with a specified
time frame

Explanation
warranties provide guarantees that suppliers with rectify or replace
malfunctioning products within a specified time period.
Question 53:
Skipped
Alexander has identified that he wishes to use performance based
specification for the purchase of a new HR staffing schedule system. Was
this the correct choice of action?

No, because technology is changing rapidly


Yes, because suppliers have greater technical knowledge
than the buying organization

Yes, because a specific blueprint is necessary for functional

requirements

No because there is clear objective criteria for evaluating

alternative solutions
Question 54:
Skipped
Michael Porter’s ‘Five Forces’ model determines the extent of competition
in an industry. The five forces are:

Power of New Entrants; Power of Substitutes; Buyers’

Power; Sellers’ Power and Competitive Rivalry

Threats from New Entrants; Threats from Substitutes;

Buyers’ Power; Sellers’ Power and Competitive Rivalry

Threats from New Entrants; Threats from Buyers; Threats

from Sellers; Threats from Markets and Competitive Rivalry

Threats from New Entrants; Threats from Substitutes;

Buyers’ Power; Sellers’ Power and Perfect Competition
Explanation
pg. 85
Question 55:
Skipped
The chief procurement officer (CPO) in a company has produced estimates
of the operating costs of the procurement department in the next financial
year. Is the CPO correct in thinking that these costs estimates will become
the department’s operating budget for the year?

yes, because the estimates cover both direct and indirect

costs

Yes, because these are the costs that the department is

expecting to incur

No, because the estimates might be incorrect

No, because initial cost estimates are only a starting point

for preparing a budget

Question 56:
Skipped
Simon Dukes has been assigned to analyze the costs of raw materials. he
must develop strategies for reducing costs and devise ways to improve
supplier relationships. which business tool best suits Simon Duke's task?

Six Sigma

Early supplier involvement

value chain analysis

Purchase Cost analysis

Explanation
Early supplier Involvement: A practice that brings together one or more
selected suppliers with a buyer's product design team early in the product
development process.

Six Sigma is a statistical-based, data-driven approach and continuous

improvement methodology for eliminating defects in a product during
manufacturing.

Value chain analysis is a strategic process where a firm evaluates its

internal activities to identify how each contributes to the firm's
competitive advantage.

Question 57:
Skipped
Which of the following are barriers to entry that commonly affect
competition in a market?
1. stock holding costs
2. product differentiation
3. economies of scale
4. customer switching costs

1 and 2 only

3 and 4 only

1 and 4 only

2 and 3 only
Explanation
There are seven sources of barriers to entry:

Economies of scale.

Product differentiation.
Capital requirements.

Switching costs.

Access to distribution channels.

Cost disadvantages independent of scale.

Government policy and regulation

Question 58:
Skipped
Which of these are advantages of using a conformance specification?
Select two that apply

Evidence of requirements in dispute

Forces consideration of actual needs

Enabling supplier flexibility and innovation

A smaller supplier base to select from

Enabling value for money solutions

Question 59:
Skipped
Which is of the following business tools minimizes waste?

Six Sigma


MRP

Lean

ERP
Explanation
Lean manufacturing is a methodology that focuses on minimizing waste
within manufacturing systems while simultaneously maximizing
productivity.
Question 60:
Skipped
Which of these are variable costs?

1) Staff overtime

2) Premises cost

3) Insurance costs

4) Materials cost

1 and 2 only

1 and 4 only

3 and 4 only


2 and 3 only
Explanation
insurance costs and premises rentals are usually fixed for relatively longer
periods of time while costs for materials and employee over-time varies
inline with scale of production.
Question 61:
Skipped
Which are 3 main activities involved in budgeting managing budgets?
1. risk assessment
2. planning
3. controlling
4. gearing
5. decision making

2, 3 and 5 only

1, 3 and 4 only

3, 4 and 5 only

1, 2 and 3 only
Explanation
risk assessment and gearing are not part of activities involved in
managing budgets. pg 52
Question 62:
Skipped
Factors that influence social views on an organization include:? select
TWO that apply

media views of the industry



recovery from natural disasters

work ethic and working practice

pollution
Explanation
pollution and recovery from natural disasters are environmental factors
not social.

pg. 137