BADM 324 Exam 1 Review

For an organization with revenue of $60,000,000, purchases of $40,000,000, and profit of $5,000,000 before tax, a 10 percent reduction in purchase spend would result in an increase in profit of: A. 80% B. 75% C. 50% D. 25% E. 10%

A. 80%

The Manufacturer King works with three vendors to supply the major components. 3 out of 12 deliveries from Supplier 1 are late. 2 out of 10 deliveries from Supplier 2 are late. 4 out of 16 deliveries from Supplier 3 are late. Which of the following statement about the delivery performance of three suppliers is correct? A.Supplier 1 provides the best delivery. B.Supplier 2 provides the best delivery. C.Supplier 3 provides the best delivery. D.Both Supplier 1 and Supplier 3 provide the best delivery.

B.Supplier 2 provides the best delivery.

A zero-defects quality strategy emphasizes: A. "it is the process, not the people." B. "trust, but verify." C. "do it right the first time." D. "show me the money." E. "lies and statistics."

C. "do it right the first time."

Which of the following ways to formalize the commitment commonly used before a negotiation is completed? A. A purchase order B. Contracts C. Letter of intent D. Blanket order

C. Letter of intent

The three main inputs of a material requirements planning (MRP) system are: A.required human resources and machine resources, and available resources. B.required manufacturing and human resources, and master production schedule. C. a bill of material, a master production schedule, and the inventory record. D.Pareto analysis results, inventory records and a master production schedule. E.inventory records, annual sales forecast, and a master production schedule.

C. a bill of material, a master production schedule, and the inventory record.

When a retailer uses daily sales of each product to identify patterns and to forecast inventory requirements, this is an example of: A.a deterministic model. B.a causal model. C.a time series forecasting technique. D.a qualitative model.E.a repetitive pattern technique.

C. a time series forecasting technique.

8. Expediting: A. is caused by buyer behavior only. B. is caused by supplier behavior only. C. may be caused by the buyer or the supplier. D. may be the result of legal non—compliance. E. is a routine order tracking process.

C. may be caused by the buyer or the supplier.

An external failure cost is: A.returns to suppliers. B.lost labor. C. warranty costs. D.scrap and rework costs. E.all of the above.

C. warranty costs.

Total quality management (TQM) tools include A. vendor-managed inventory. B.statistical process control (SPC). C.quality function deployment (QFD). D. B and C. E. A, B, and C.

D. B and C

Which of the following is not the reason to make? A. To preserve technological secrets. B. To avoid sole-source dependency. C. The purchase option is too expensive. D. Lack of production capacity. E. To reduce risk.

D. Lack of production capacity.

ISO 9001:2008 provides a tested framework for a systematic approach to consistently delivering product that satisfies customers' expectations by: A. dictating how quality requirements should be met in every organization. B.Focuses on environmental issues C.assuming all national cultures will meet quality requirements the same way. D. providing a set of standardized requirements a quality system must meet. E.assuming all business sectors will meet quality requirements the same way.

D. providing a set of standardized requirements a quality system must meet.

Which of the following techniques are used for continuous improvement? A.Pareto charts. B.Cause-and-effect diagrams. C.Process control charts. D.All of the above

D.All of the above

When a commercial janitorial service company predicts demand for janitorial services using commercial building permits issued, office leasing and vacancy rates, this is an example of: A. a causal model. B.a repetitive pattern modeling tool. C.a time series forecasting technique. D.a deterministic model. E.a qualitative forecasting technique.

A. a causal model.

7. One purpose of a requisition is: A. to request or requisition supplies from external suppliers. B. to clarify the description of need before communicating with potential suppliers. C. to give users a way to authorize buyers to acquire goods and services. D. to solicit price quotes for goods or services from suppliers. E. to give finance a way to have the final say in any decision to spend money.

B. to clarify the description of need before communicating with potential suppliers.

When selecting freight carriers, buyers are most concerned with: A.types of equipment available. B.intermodal capabilities. C.ability to deliver on-time with no damages. D.geographic coverage. E.shipment security.

C.ability to deliver on-time with no damages.

In FOB Destination, Freight Collect and Allowed is when: A.the buyer gains title at point of destination, and buyer pays and bears the freight charges. B.the buyers gains title at point of origin, and pays the freight charges, but seller bears the freight charges. C.the seller holds title of the goods during transit, and buyer pays and bears the freight charges. D. the seller holds title of the goods during transit and bears the freight charges, but buyer pays the freight charges. E.the carrier holds title of the goods during transit, buyer pays and seller bears the freight charges.

D. the seller holds title of the goods during transit and bears the freight charges, but buyer pays the freight charges.

Which of the following is not considered as the cost of controlling quality? A. Quality assurance programs B.Employee training C.Prevention maintenance D.Testing E .Retesting

E .Retesting

Outsourcing is: A. a low risk venture because global suppliers have almost unlimited capabilities. B. a low risk venture because the costs of reversing the decision are low. C. a moderate risk venture because it is easy to determine core competencies. D. a high risk venture because the decision makers' reputations are at stake. E. a high risk venture because the costs of reversing the decision are often high.

E. a high risk venture because the costs of reversing the decision are often high.

Which statement about ABC analysis is correct? A A items are slower mover, and do not need many attention. B. B items are high volume and high value items. C. Two-bin (Kanban) system can be used to management Class C items. D.Periodical review system can be used to manage Class A items. E. Continous review system can be used to manage Class B items.

C. Two-bin (Kanban) system can be used to management Class C items.

Which of the following statements about process quality control is NOT true? A. Assignable cause variation is also referred as special cause variation. B.An observation outside the control limits is an example of a special cause of variation. C.Common cause variation can be eliminated from the process by removing the potential causes. D.The control limits will include 99.74% of the population under the normal probability distribution assuming that the process is in control.

C.Common cause variation can be eliminated from the process by removing the potential causes.

In statistical process control (SPC), special or assignable causes of variation: A . Are outside and nonrandom problems such as the breakdown of machinery, material variation, or human error. B .are intrinsic to the process and will always be there unless the process is changed. C. have everything to do with the underlying process and can only be eliminated by changing the process.D. are of secondary importance in quality control procedures used to detect and eliminate variation.E. can be present in a process that is fully capable of meeting specifications consistently.

A . Are outside and nonrandom problems such as the breakdown of machinery, material variation, or human error.

7. Outsourcing: A. occurs primarily in large manufacturing firms in the private sector, but is rarely practiced in public purchasing. B. decisions are based on financial factors that most organizations can easily access through their accounting system. C. usually results in increased hiring to attain expertise that the organization does not already possess. D. may reduce or control operating costs, improve focus on core competencies, and gain access to world-class capabilities. E. is a low risk venture because the firm can always revert back to performing the function in-house at low cost.

D. may reduce or control operating costs, improve focus on core competencies, and gain access to world-class capabilities.

Demand for buttons and zippers at a sportswear manufacturer is an example of: A.Dependent demand. B. buffer demand. C. anticipated demand. D.independent demand.

A.Dependent demand.

The real costs of quality: A. are frequently overstated in an organization. B. are incurred in the quality control department. C. rise significantly as defects increase in the finished product. D.tend to rise significantly with the cost of prevention. E.are easily identified by the accounting department.

C. rise significantly as defects increase in the finished product.

A solicitation document that normally allows the supplier to submit technical specifications is called an: A. request for quotation (RFQ). B. request for proposal (RFP). C. request for information (RFI). D. request for bid (RFB). E. request for price (RFP).

B. request for proposal (RFP).

Subcontracting refers to the practice of: A. A prime contractor bidding out part of a job to another contractor. B. An organization hiring a contractor to perform a task it has been doing in house C. An organization hiring substitute labor to cover for a supplier's labor shortage. D. A prime contractor bidding on another contractor's incomplete jobs. E. A prime contractor hiring substitute labor during a strike.

A. A prime contractor bidding out part of a job to another contractor.

Which of the following sourcing business models does not emphasize collaborative relationship with suppliers? A. Approved Provider Model B. Preferred Provider Model C. Vested Business Model D. Performance-Based Model E. Managed Service Model

A. Approved Provider Model

If a non-governement buyer has a clear and unambiguous description or specification and wants to find out which supplier can deliver the best value when and where needed, he or she will typically issue a: A. Request for quotation (RFQ). B. Request for proposal (RFP). C. Request for information (RFI). D. Request for bid (RFB). E. Request for price (RFP).

A. Request for quotation (RFQ).

When a team decides that a task or function currently performed by company employees is a noncore competency, the team is likely to recommend: A. Insourcing B. Outsourcing C. Continuing to make D. Continuing to buy

B. Outsourcing

In F.O.B. Origin: A.the buyer gains title of the goods when the carrier signs at point of destination. B. the buyer gains title of the goods when the carrier signs at point of origin. C.the seller has the responsibility for selecting the carrier. D.the seller has the responsibility for filing any damage claims during transit. E.the carrier holds title of the goods during transit.

B. the buyer gains title of the goods when the carrier signs at point of origin.

On an annual requirement of 100 items spread evenly throughout the year, any purchaser has an opportunity of buying all 100 units at a price of $100 each, or buying 10 units at a time at a price of $130. If the inventory carrying cost is 20 percent per year and assuming no ordering costs: A.buying 100 at a time will save the company $3,600 per year. B.buying 100 at a time will save the company $2,260 per year. C. buying 100 at a time will save the company $2,130 per year. D.buying 10 at a time will save the company $2,130 per year. E.buying 10 at a time will save the company $11,000 per year.

C. buying 100 at a time will save the company $2,130 per year.

Based on the information in Question # 3, and assume that the proposed investment to build the distribution center is 3 million dollars. Using the cost saving to justify the investment, which of the following statements is correct? A.If the finance department requires a hurdle rate of 25%, based on the information, this proposal will not be approved, because the ROI generated based on cost saving is less than 25%. B.The payback period based on the cost saving is 1.5 years C.The payback period based on the cost saving is 2.4 years D.The cost saving per year is 2 million dollars.

C.The payback period based on the cost saving is 2.4 years

1. Non-core competencies of an organization are typically: A. The same for companies in the same industry B. Dependent on the staff performing the tasks. C. Seldom outsourced because they contribute to competitive advantage. D. The first things to be outsourced to access supplier expertise. E. Flexible and easily changed depending on who is in charge.

D. The first things to be outsourced to access supplier expertise.

Which of the following statement about supplier may not be the reason to be listed as qualified supplier? A. The supplier offers low price with desired quality. B. The supplier geographically locates close to our plant. C. The supplier has a quality advantage. D. The supplier is a men-owned business. E. The supplier is minority-owned business.

D. The supplier is a men-owned business.

The return on assets effect (ROA) quantifies and measures: A. The indirect contribution of supply management to profitability. B. Any increase in sales that occurs at a greater rate than the cost of assets. C. reduction in the allocations to the operating budget of the supply department. D. the impact of supply actions on inventory and the balance sheet. E. the effect on profitability of reduced spend compared to a sales increase.

D. the impact of supply actions on inventory and the balance sheet.

Which of the following statements about Cross-Docking is not correct? A. There is a large storage area in a Cross-Docking. B.The Cross-Docking requires less handling, since products arriving at the loading dock will be allocated for outbound delivery. C.Cross-Docking reduces the time from producer to the customer, which helps improve customer satisfaction. D.Cross-Docking reduces the need for warehouse space, as there is no requirement to store the products. E.Both C and D

A. There is a large storage area in a Cross-Docking.

Some of the concerns about outsourcing are: A. layoffs, exposure to supplier's ricks, and loss of control. B. supply's ability to provide the required inputs at the right quality and price. C. transitioning from supplier's operations to internal operations. D. losing long-term buyer-supplier relationships and cost advantages. E. loss of a lean enterprise as the supply base grows.

A. layoffs, exposure to supplier's ricks, and loss of control. B. supply's ability to provide the required inputs at the right quality and price.

Which of the following statement about inventory review system is not correct? A. Fixed order quantity system generate high maintenance cost. B. In fixed time period review system, every addition and withdraw in inventory should be recorded precisely. C.Fixed time period system has high risk of stock out, because stock out may occur over lead time and review period. D.Under the fixed order quantity system, order quantity is EOQ, but the time intervals between two orders differ depends on demand rate. E.Under the fixed time period system, order quantity varies depends on demand rate, but the review period is fixed.

B. In fixed time period review system, every addition and withdraw in inventory should be recorded precisely.

Outsourcing of service is: A. Unrealistic because of the difficulty in measuring service providers' performance. B. Realistic if service requirements and quality expectations can be clearly defined. C. Realistic because of the ease in measuring service providers' performance. D. Increasing because it is easy to define service requirements and measure quality. E. Decreasing because buyers are dissatisfied with most third party service providers.

B. Realistic if service requirements and quality expectations can be clearly defined.

When the carrying cost of inventory is expressed as a percentage: A.the lower it is, the lower the economic order quantity. B. it is multiplied by the material unit cost to calculate the per unit carrying cost. C.it usually exceeds 57.5 percent per year. D.it must exclude the insurance cost of inventory. E.it is usually the same as the borrowing cost of the organization.

B. it is multiplied by the material unit cost to calculate the per unit carrying cost.

Which correctly identifies the following examples of quality costs as internal failure (I), external failure (E), appraisal costs (A), and prevention costs (P)? A.Production recalls = I; scrap and in-line inspections =E; loss of customers = A; machine maintenance and operator training =P. B.Operation training =I; product recalls and loss of customers = E; scrap and machine maintenance =A; in-line inspection =P. C.Machine maintenance and in-line inspections = I; scrap and loss of customers =E; product recalls =A; operator training =P. D. Scrap =I; production recalls and loss of customers =E; in-line inspections =A; machine maintenance and operator training =P. E.none of the above

D. Scrap =I; production recalls and loss of customers =E; in-line inspections =A; machine maintenance and operator training =P.

Which statement is most accurate when thinking about deciding how much to buy: A. forecasts of future demand, lead times, and prices are usually fairly accurate. B.the price premium to attain the desired quantity is usually less than the costs of not having materials available when needed. C.managers seldom make purchase decisions until they are absolutely sure of the volume required. D. balancing price, volume, carrying cost, and the cost of stockouts is key to successfully determining how much to buy at any point in time. E.the costs of placing orders and holding inventory are so low they do not significantly affect the decision of how much to buy

D. balancing price, volume, carrying cost, and the cost of stockouts is key to successfully determining how much to buy at any point in time.

A manufacturer is considering to open a distribution center between its manufacturing plant and major customers. The estimated annual shipping volume to its major customers is 50,000 tons. Currently, it is using Less-than-truck (LTL) load shipping to deliver, which costs $120 per ton. The opening of the distribution center allows using Truck-load (TL) shipping to delivery from the manufacturing plant to the distribution center, which costs $70 per ton. Then LTL load shipping will be used for local delivery , which costs $15 per ton. The distribution center's inventory holding cost is $10 per ton. Based on this information, which of the following statement is correct? A.The total logistic cost without a distribution center is $5,000,000. B.The total logistic cost with a distribution center is $3,500,000. C.The total logistic cost with a distribution center is $4,000,000. D.The total logistic cost with a distribution center is $4,750,000.

D.The total logistic cost with a distribution center is $4,750,000.

Supply may contribute to the containment of the costs of poor quality by addressing: A. appraisal costs. B.internal costs. C.external costs. D.prevention costs. E. all of the above.

E. all of the above.

Outsourcing or using third-party logistics services have: A. remained flat due to increased challenges of international logistics. B.become increasingly popular with small organizations, but not larger ones. C. declined in popularity due to declining service provider performance. D.declined as transportation has been re-regulated. E. increased as organizations focus on core competencies.

E. increased as organizations focus on core competencies.

A material requirements planning (MRP) system: A.controls the "A" items B.maximizes inventory. C.is easily carried out without technology. D.minimizes the use of data. E. requires explosion of the bill of material as the basis of planning.

E. requires explosion of the bill of material as the basis of planning.