Exam 1
1. A supply manager issues a request for proposal for engineering services. In order to provide clarification on the specifications, the company holds a question-and-answer session for interested suppliers. Shortly after the question-and-answer session is held and before any proposals are actually received, the firm's engineering department revises the specifications. Given this situation, which of the following should the supply manager do FIRST? (A) Call and email the suppliers of the change, tell them when the new specifications will be available, and ask for immediate notification if additional time will be required. (B) Write a letter to each supplier advising of the change, tell each supplier when the new specifications will be available, and ask for immediate notification if additional time will be required. (C) Hold an interim pre-bid meeting with all suppliers to discuss and clarify the revised specifications, and ask for immediate notification if additional time will be required. (D) Prepare and distribute a brand-new request for proposal package to
A
14. Supplier B is one of two global manufacturers of a certain commodity chemical. During a time of supply constraint, Supplier B constructs a new manufacturing facility, which doubles its capacity. Just as the new facility is ready to commence operations, the global demand for the commodity drops dramatically, due to the development of a superior substitute. From the moment that Supplier B begins construction of the new facility, Company Ns negotiating position relative to that of Supplier B became (A) much stronger (B) somewhat stronger (C) somewhat weaker (D) much weaker
A
15. A company conducts an e-auction for forklifts. Immediately after the e-auction concludes, the two suppliers with the lowest prices inform the company they will not be able to honor their pricing. To avoid situations like this in the future, which of the following is the BEST course of action for the company to take? (A) Include a clause within the registration process stating that participants will honor their prices, or be excluded from the current auction and all subsequent auctions. (B) Exclude the two suppliers from any future e-auctions that the company holds, as they did not honor their e-auction pricing. (C) Rather than using e-auctions, opt for a closed-bid process to avoid the possibility of companies not honoring their pricing during the e-auctions. (D) Verify with the suppliers midway through thee-auction to make certain that they will continue to honor their prices.
A
19. A supply manager is prepanng for negotiations with a business consulting supplier. The supplier provides services to IT and corporate headquarters, and has frequent interactions with a number of people across the company, including executive staff. Which of the following is the BEST course of action for the supply manager to take? (A) Set up a meeting with all the key stakeholders to discuss the upcoming negotiations and what they should say, and send a follow- up email to all attendees plus those who could not attend. (B) Send an email to all employees, letting them know that negotiations are being conducted with this supplier, and that no one should have any interaction with the supplier while negotiations continue. (C) Contact the head of each department and explain that negotiations will be conducted with the supplier, and ask the department heads to share the information with their teams. (D) Start negotiations with the supplier, and instruct them not to talk to other people within the company during the negotiation period.
A
2. Which of the following should have the MOST influence in determining end product specifications, so as to minimize the potential for returns? (A) Marketing (B) Supply management (C) Engineering (D) Manufacturing
A
27. What is the contract term for the transfer by one party of their right or obligations to another party? A) Assignment (B) Confidentiality (C) Indemnification (D) Severability
A
29. A supply manager holds a pre-performance conference with a chosen supplier. This event falls under which of the following areas of responsibility? (A) Contract administration (B) Contract closeout (C) Earned value management (D) Project planning
A
30. Risk monitoring, as implemented under the process of contract administration, is MOST likely to take place under the phase or step known as (A) performance measurement (B) performance reporting (C) pre-performance conference (D) project closeout
A
35. A supply manager is evaluating a departmental budget and notices that there is no comparison between established goals and actual results. This indicates an omission in which of the following? (A) Controlling (B) Executing (C) Organizing (D) Planning
A
38. A firm in the automotive industry is primarily decentralized, with a small corporate purchasing staff. The staff coordinates steel purchases across all of its buying organizations by inviting participation from each buying unit. This coordinated approach is BEST described as (A) a commodity council (B) lead divisional buying (C) pool buying (D) a regional buying group
A
39. A buying organization has the greatest opportunity to experience cost efficiencies when it (A) understands the supplier's manufacturing processes (B) shares the business forecasting model (C) secures confidentiality agreements (D) promises the supplier shared responsibility in managing inventory
A
4. A supply manager completes a category profile and identifies services provided through multiple suppliers. A market and industry analysis shows that the service providers are growing their businesses by acquiring competitors, thus enabling them to provide a greater range of services. Which of the following techniques will BEST enable the supply manager to leverage market competition? (A) Lotting strategy (B) Market-basket model (C) Market segmentation (D) Sole sourcing
A
45. GHI Company's manufacturing process is a high energy user, which the company has managed by using a variety of energy sources- fossil-based and renewable - and by being careful stewards of energy for a number of years. Now, however, GHI's primary competition is reducing the prices of its products. GHI's only area of potential cost reduction is in non-addressable costs, which are a high percentage of their COGS. These costs received less attention than addressable categories in the past because they were considered beyond control. GHI's supply management decides to reanalyze them to determine if they can be lowered in any way. Which of the following will MOST likely offer potential savings? (A) Local government enacting tax concessions for clean energy initiatives (B) Licensing fees and requirements remaining stable, with no changes foreseen (C) Rezoning of the area in which the company's headquarters resides (D) Decreasing total waste generated, offsetting higher disposal costs
A
48. In anticipation of an upcoming price increase by its current supplier, a supply manager in charge of purchasing corrugated boxes conducts a competitive bid to determine if there are any suppliers who can offer more competitive prices. The supply manager accepts a bid from a supplier who will meet the current supplier's price, and will also hold pricing firm for a second year. The actions of the supply manager can BEST be described as (A) cost avoidance (B) cost containment (C) cost reduction (D) cost savings
A
5. A supply manager implements a system whereby the potential supplier names are hidden until final contract awards are made. This example IS BEST described as ensuring (A) confidential information is protected (B) diversity initiatives are met (C) total costs are minimized (D) collusion will not occur
A
50. Several items are identified as 'critical' in a supply segmentation analysis. In order to add value, the supply management professional should look to (A) issue long-term contracts (B) issue short-term contracts (C) join a consortium (D) leverage buy
A
53. Which of the following cost analysis methods would be LEAST useful in selecting and negotiating with a domestic supplier of capital equipment to be used in a production facility? (A) Landed cost (B) Life-cycle cost (C) Purchase-related cost (D) Total cost of ownership
A
60. Which of the following depreciation methods is compatible with the matching principle where the higher depreciation expense in earlier years parallels the asset's greater earning power? (A) Declining Balance Method (B) Straight Line Method (C) Sum of Years Digits Method (D) Units of Activity Method
A
66. A supply manager is evaluating potential overseas suppliers located in underdeveloped countries. In examining the infrastructure of each country, which of the following considerations 1s LEAST important? (A) Currency exchange rate (B) Stability of the government (C) Technology availability (D) Transportation systems
A
68. In which of the following areas is the movement into offshore markets and global sourcing MOST likely to create risks? (A) Business continuity (B) Scaling of procurement (C) Strategic execution (D) Market expansion
A
71. DEF Inc. is making efforts to buy from a wider geographic base of suppliers. However, the company is concerned about how to release detailed specifications to potential suppliers without compromising proprietary information. Which of the following steps should DEF take FIRST? (A) Review laws concerning protection of intellectual property in the countries of interest (B) Search the market for counterfeit products produced under brand name or logo mimicking (C) Strengthen confidentiality clauses in contracts with suppliers in other countries (D) Alert marketing to opportunities of creating a more uniform brand message internationally
A
73. RST is a manufacturer in Asia that produces wooden bar stools sold in many U.S. department stores. The assembled bar stools are packaged in corrugated boxes, one unit per box. RST has developed a design that is very inexpensive to assemble in comparison to the costs to manufacture the components. RST is looking for ways to reduce the landed cost of the bar stools. Which of the following is the BEST way of dealing with this issue? (A) Ship the components to the U.S. and assemble them nearer the point of sale. (B) Move all manufacturing operations to the U.S. (C) Use 20-foot rather that 40-foot ocean containers to ship them. (D) Ask the freight forwarder to only book the largest vessels for ocean transport.
A
77. Costs associated with transportation, warehousing, material handling, and communications are usually higher for international sourcing than for domestic sourcing, due to all of the following EXCEPT (A) duty-free zones (B) economic boundaries (C) increased cycle time (D) trade barriers
A
79. All of the following are used to ensure security and ease customs clearance within international trade EXCEPT (A) suretyship (B) RFID (C) smart box technology (D) smart seals
A
81. Which of the following is MOST applicable to clarifying the costs, risks and obligations of buyers and sellers in cross-border transactions? (A) The Icoterms® Rules (International Commercial Terms) (B) U.N. Convention on Contracts for International Sale of Goods (CISG) (C) International Anti-Bribery and Fair Competition Act (D) U.S. Export Administration ActA
A
87. TUV Company's product manufacture relies upon the use of a highly toxic chemical compound as an input, of which the byproduct is a highly toxic, corrosive liquid. The disposal costs for this byproduct have been increasing dramatically each year. TUV's suppliers have made several proposals to deal with this problem, all of which would cost roughly the same but yield different impacts. Which of the following proposals should the organization adopt in order to achieve the MOST benefit? (A) Purchase a naturally occurring additive that increases the effectiveness of the toxic input by 75%, and yields water as an additional byproduct. (B) Purchase a naturally occurring additive that neutralizes the toxic liquid byproduct so that it is no longer corrosive. (C) Install a filtering system that removes solids from the toxic liquid byproduct so that it can be sold for use in other applications. (D) Install a recirculation system that allows the use of some of the toxic liquid byproduct for cleaning the piping systems within the plant.
A
90. A firm is, concerned about the risks and impact of the disposal of hazardous wastes generated by its production facilities. The firm contracts out most, but not all, of its waste handling to local specialists. The firm wants to have maximum protection in a variety of situations. Which of the following will MOST likely protect the firm? (A) Complying fully with mandatory treatment standards (B) Purchasing indemnity insurance to cover potential claims (C) Including strong "hold harmless" clauses in all agreements (D) Creating a subsidiary company to shield its parent from liability
A
91. As part of its environmental responsibility efforts, a company switches its burnishing process from using metal abrasives that must be disposed of carefully to nut shell chips that can merely be composted or mulched. This is an example of (A) a cradle-to-cradle design (B) recycling (C) reuse (D) the zerowaste concept
A
95. A supply manager is trying to improve employee safety at an organization that is mandated to do so. Which of the following actions is LEAST likely to be of benefit to this objective? (A) Reviewing and revising records retention policies as needed to maintain an ongoing picture of the environment (B) Reviewing training programs annually to ensure all required information is included (C) Working with suppliers of protective equipment to obtain the best combination of reasonable price and value-added service (D) Confirming with suppliers that material safety data sheets are kept current
A
96. When selecting a particular source of supply, which of the following actions is LEAST likely to result in a significant impact on cost? (A) Placing business with a local supplier (B) Selecting a single source of supply (C) Purchasing an alternative to a sole-sourced product (D) Negotiating an exclusive purchase agreement
A
97. Which of the following is MOST useful in identifying supply opportunities? (A) Market intelligence (B) Purchasing Managers Index (PMI®) (C) Risk analysis (D) Visionary supply chains
A
12. A supply manager for XYZ Corp. rs planning for negotiations with Supplier A, a provider of software critical for use on XYZ's production line. XYZ likes the softw.are, but was recently alerted by Supplier A that they are dropping support for the version that XYZ uses. The supply manager learns that an upgrade is cost prohibitive for XYZ. Prior to negotiations, the supply manager asks the IT department to detail its requirements for support of the software, and to assign an IT employee to attend the negotiations. The day before the negotiation, the IT employee calls the supply manager and states that he is unable to attend due to a scheduling conflict. He further states that he is confident the supply manager can represent the IT department's needs in the negotiations. Given this scenario, which of the following should the supply manager do? (A) Follow the advice of the IT employee and represent IT in the negotiations (B) Escalate the issue to the IT director, ensuring that they send a representative. (C) Conduct the negotiations with the agreement that support issues will be dealt with at a later time (D) Postpone the negotiations until an IT representative becomes available
B
17. Shortly after contract negotiations have begun, a supplier makes an offer with a price well above the expected range. Which of the following tactics is the supplier using? (A) Foot in the door (B) High ball (C) Strong initial offer (D) Phantom quote
B
18. Both parties leave the room during a negotiation with the understanding that they will reconvene at a later time. This is known as a (A) stalemate (B) recess (C) caucus (D) conference
B
22. A hospital purchases glass laboratory supplies through a co-op. Because of the volume prices paid by the consortium, the supplier will only offer generic supplies. As a result, there is considerable variation in quality, which has led to complaints from internal customers. In . this situation, which of the following should the supply manager do FIRST? (A) Instruct the co-op to change suppliers (B) Determine if other members of the co-op have the same problem (C) Join the co-op's commodity team to increase pressure on the supplier (D) Inform the supplier that co-op payments may be withheld if quality does not improve
B
26. What is the contract term for a provision to restrict the disclosure of proprietary information? A) Assignment (B) Confidentiality (C) Indemnification (D) Severability
B
33. Which of the following types of budgets is MOST likely to be used for logistics financial controllership? (A) Capital (B) Fixed (C) Flexible (D) Zero-based
B
43. A sourcing specialist working on a project improvement team identifies a product line for which both profit margins and sales volumes have declined. Although the end product is a staple in the industry, customers have resisted price increases and have sought alternatives. The product is also subject to sharp fluctuations in demand due to consumer trends. Resultant stock outages have led to lost sales. Through value analysis, the team identifies a ball bearing component that is single sourced from a supplier to the aerospace industry. The supplier was chosen years back, because of its ability to provide the precise overall dimensions required for the component. Discussions with the supplier reveal that 3 weeks of the 6-week lead time for the product are spent in a precision polishing operation for a smooth surface condition. The process also accounts for one-third of the product cost. Product quality and reliability from the supplier have been exceptional, although there are other suppliers for ball bearings. Which of the following courses of action should the project team recommend to recoup shrinking margins and volume for this product line? (A) Change to a lower priced supplier with shorter lead times (B) Work with the current supplier to reconsider the high-polish finish (C) Provide better demand information to the supplier to reduce lead time (D) Negotiate with the supplier to provide supplier-managed
B
44. In order to guarantee supply of a component that appears in the critical quadrant of the supplier segmentation model, a supply manager should (A) join a consortium (B) issue a long-term contract (C) use supplier-managed inventory (D) utilize a systems contract
B
51. Which of the following provides the MOST comprehensive view when determining the total cost of procured materials? (A) Product, transportation, and delivery (B) Product, process, market, source, and security (C) Product, logistics, storage, and handling (D) Product, indirect costs, and profit
B
54. Which of the following information is needed to perform a simplified breakeven ROI analysis calculation? I. Purchase price II. Time value of money III. Life expectancy of the equipment IV. Annual savings (A) I and III only (B) I and IV only (C) II and III only (D) I, II, III and IV
B
58. A company wishes to reduce costs on a product it manufactures. The company is considering a capital expenditure of $80,000, which would generate an annual net cash flow of $30,000 beginning in year one. Marketing has determined the product will be sold for three years after the new equipment is installed. The company expects an annual discount rate of 8%. What is the net present value of this opportunity? (A) -$9,200 (B) -$2,688 (C) $3,600 (D) $10,000
B
6. A supply manager for a privately held manufacturing company is preparing an RFP for raw materials. None of the RFP recipients is an incumbent, and the award resulting from the RFP is expected to be of significant dollar value. The supply manager is concerned that the lack of publicly available financial information could impact willingness of the prospective suppliers to submit proposals. Which of the following will BEST address the concerns of the prospective bidders? (A) Escrow account (B) Letter of credit (C) Payment bond (D) Surety bond
B
61. Which of the following depreciation methods is the simplest to calculate and makes the assumption that it is a function of time rather than use? (A) Declining Balance Method (B) Straight Line Method (C) Sum of Years Digits Method (D) Units of Activity Method
B
65. A supply manager is evaluating several potential overseas suppliers, and the degree of risk each would bring to the supply chain. Which of the following employment characteristics would be MOST favorable in a manufacturing relationship? (A) Employment-for-life practices (B) Flexibility in hiring and firing employees (C) High unemployment rates (D) High union membership of skilled labor
B
67. A manufacturer's solicitation documents will on occasion include detailed design specifications that are considered proprietary. Several potential suppliers from developing countries have expressed interest in offering products or services to the manufacturer company. Which of the following actions will MOST likely help balance intellectual property protection with the expanded supplier base? (A) Sourcing strictly from suppliers in advanced industrial countries (B) Checking supplier references and past performance (C) Drafting strong contract language concerning confidentiality (D) Defining where any disputes will be settled
B
69. When assessing international markets for suppliers, the MOST important item supply management should consider is the (A) culture of the supplier (B) risk of the extended supply chain (C) broadening supply base (D) expansion of the customer base
B
7 5. The concept of exchange rates is BEST defined as (A) the stability level of the supplier country's currency (B) the price at which one currency can be bought with another currency (C) the payment mechanism employed by the buying entity (D) the tariff percent applied to imported goods
B
8. A supply manager is negotiating with a critical supplier. The parties have relatively equal bargaining power. Which of the following would MOST likely occur in "win-win" negotiation between these parties? (A) The supply manager and supplier conclude the negotiation by splitting the difference between their respective positions. (B) The supply manager and supplier each find concessions with equal weight/value to provide a balanced outcome. (C) The supply manager and supplier decide to share confidential information. (D) The supply manager and supplier establish an appropriate settlement range for the continuation of negotiations
B
80. A sourcing specialist at a global organization has been experiencing extended lead times for security components sourced from Asia. Although the products are shipped on a timely basis, due to their nature, they are being held in customs for extended time periods. Given this situation, which of the following would be the BEST approach for minimizing total lead time? (A) Working with a customs broker to minimize clearance time (B) Initiating the use of smart seals on future shipments (C) Exploring point-of-destination shipment alternatives (D) Paying expedited customs fees to reduce total cost of ownership
B
82. Which of the following BEST describes the act of extortion? (A) Accepting monetary compensation from a supplier in consideration of award of a contract (B) Obtaining cash or something else of value through the abuse of one's role in an organization (C) Deceit, trickery or breach of confidence perpetrated for profit or to gain some unfair advantage (D) Expecting reciprocal business of equal value from the seller's organization
B
85. Top management abuses and scandals will MOST likely lead to increased emphasis on (A) training (B) ethical conduct (C) supplier diversity (D) openness in reporting
B
88. Consider the following alternatives for the disposal of surplus materials : I. Sell in the secondary marketplace II. Use elsewhere within the organization III. Return to suppliers IV. Donate to charity Which of the following options BEST presents these alternatives in order of return on investment (from most to least)? (A) I, II, III, IV (B) II, III, I, IV (C) III, II, I, IV (D) IV, I, III, II
B
92. TUV Inc. produces a line of electronic monitoring instruments that includes a component containing a small amount of hazardous material. TUV is reviewing relevant laws and regulations throughout its wide customer base, including the European Union, which comes under the Restriction of Hazardous Substances (RoHS). In order to comply with all requirements including RoHS, which of the following is the BEST course of action for TlN to take? (A) Improve documentation of the intrinsic properties of chemicals used in manufacturing (B) Determine how expansion of this directive may affect markets for the company's products (C) Consult with in-house legal counsel to ensure documentation meets international standards (D) Update subcontractor safety standards in specifications and contracts
B
93. The supply management organization for XYZ Inc. has been asked to review occupational safety regulations, as they affect relationships with suppliers, including for possible liability. Which of the following is TRUE in this situation? (A) As suppliers are accountable for their own violations, no action on XYZ's part is necessary. (B) "Compliance with the law" clauses should be included in contracts for goods and services. (C) The regulations will be a concern only if XYZ is headquartered in the U.S. or EU. (D) Supply management need only concentrate on XYZ's behavior, as it cannot control that of the suppliers.
B
99. In supply base analysis, what degree of competition exists when there are only a few local suppliers, and they are similar in behavior and pricing? (A) Technical (B) Limited (C) Multiple (D) Fair and open
B
100. A $0.12 per barrel tax on imported oil is an example of which of the following? (A) Ad valorem duty (B) Goods and services tax (C) Specific duty (D) Value-added tax
C
11. Which of the following is likely to be the BEST use of social media sites such as Linkedin during the preparation for negotiations with a potential supplier? (A) Selecting the ideal negotiation site (B) Determining objectives for the negotiation (C) Collecting information, reports and comments on the supplier (D) Defining the roles and responsibilities of the negotiating team
C
16. Which of the following is the MOST effective method for negotiating with the sole supplier of a unique item? (A) Price analysis negotiations (B) Price comparison negotiations (C) Cost analysis negotiations (D) Adversarial negotiations
C
21. A supply manager determines , that only one supplier possesses the process capabilities to make a custom-designed part. In this situation, which of the following negotiation strategies would be appropriate? I. Advising the potential supplier that substitute parts are under consideration II. Advising the supplier that the part may be manufactured in-house (A) I only (B) II only (C) Both I and II (D) Neither I nor II
C
23. Which of the following is used to confer decision-making power upon an individual when the regular decision- maker is unavailable? (A) Assignability provision (B) Dealer's agreement (C) Letter of authorization (D) Limitation of liability
C
25. What is the contract term for the obligation of one party to cover the loss or damage suffered by another party? A) Assignment (B) Confidentiality (C) Indemnification (D) Severability
C
3 7. Smith is a supply manager for XYZ Inc. Smith issues a request for proposal and awards the contract to a new overseas supplier. As Smith's team concludes negotiations with the selected supplier, XYZ's chief financial officer inquires about the project's budget. Smith had assumed that supply management had the usual authorization to spend under the current direct materials budget and therefore did not prepare a budget. Given this situation, which of the following should Smith do? (A) Include a member of the CFO's staff in the negotiations and ask him or her to report budgetary issues back to the CFO. (B) Place the orders, as Smith has pre-authorization to purchase under the existing budget process. (C) Create a specialized budget to track cost performance of the new program. (D) Suspend the negotiations and purchase the item from current suppliers.
C
31. If a supplier does not respond to a buyer's reject or rework notice of nonconforming goods within a reasonable amount of time, the LEAST appropriate course of action for the buyer to take would be to (A) store the goods and file a claim for storage charges (B) ship the goods back to the supplier freight collect (C) accept the goods (D) sell the goods and charge the supplier for the sales costs
C
32. After the notice period specified m a "Termination for Convenience" clause, the buying organization may no longer (A) employ that contractor for providing other goods or services (B) request damages for any default under the contract (C) seek certain deliverables in the contract (D) provide payments to the contractor
C
34. A supply manager has been asked by the facilities manager to prepare a purchase order for $3,000 to buy a new air compressor for the company headquarters. Company policy requires senior management authorization for purchases greater than $2,500, yet the facilities manager has not secured this authorization. Which of the following is the BEST course of action for the supply manager to take? (A) Place the order without the budget authorization. (B) Contact the finance office for the budget authorization. (C) Inform the facilities manager to obtain the authorization. (D) Negotiate a price that falls under the capital budget threshold.
C
36. After the evaluation of cost data and the determination of the budget figures, what is the NEXT step in the budgeting process? (A) Identifying financial resources allocated to each department (B) Negotiating with suppliers (C) Defining processes for comparing goals to actual results (D) Analyzing contract pricing
C
40. A supply manager has been asked to participate in a cost management program to help her organization generate more working capital. Which of the following is the BEST way for the supply manager to contribute to that goal? (A) Establishing a standard cost system (B) Employing a cost modeling tool (C) Focusing on a standardization program (D) Implementing a contribution to margin analysis
C
41. ABC Corporation has a centralized supply management organization. The CEO directs that the organization must lower costs and expenses, and that performance appraisals will be based on results achieved. Given this scenario, which of the following should be given the LEAST attention? (A) E-procurement (B) Spend analysis (C) Supplier integration (D) Strategic sourcing
C
46. Using a sole sourced supplier with significant transparency of costs between buyer and seller in order to leverage each firm's comparative advantage is an example of a strategy for what category of spend? (A) Critical (B) Leverage (C) Strategic (D) Tactical
C
47. Which of the following market factors would be plotted on the low end of the market complexity axis on a spend analysis matrix? (A) Many suppliers, excess capacity, unique specifications, no substitutes (B) Standard specifications, possible substitutes, few suppliers, restricted capacity (C) Many suppliers, excess capacity, standard specifications, possible substitutes (D) Few suppliers, restricted capacity, unique specifications, no substitutes
C
49. Which of the following sources of spend analysis data is likely to contain the GREATEST level of detail? (A) Accounts payable (B) General ledger (C) Supplier data (D) Supply management
C
52. Consider the following financial data for XYZ, Inc.: Long-term debt $400,000 Preferred stock $300,000 Common equity $600,000 Total capital $1,300,000 \XTeighted cost of long-term debt: 6.2% After-tax cost of preferred stock: 10.5% Weighted cost of common equity: 12.4% Based on these data, what is the weighted average cost of capital? (A) 9.75% (B) 9.90% (C) 10.05% (D) 18.70%
C
57. A supply manager for an apparel company must decide whether to change suppliers of polyurethane hangers for the finished products that are shipped to retailers. It will cost approximately $20,000 to make all of the necessary changes to the company's operation in order to take on a new supplier. The current supplier is priced $0.05 per unit higher than the lowest competitor. The lowest competitor's quality and service are equal to that of the current supplier. What quantity of hangers will the supply manager need to buy to justify making the change on a cost basis? (A) 40,001 (B) 50,001 (C) 400,001 (D) 500,001
C
59. What is the method of depreciation that assumes that an item's utility declines over time, resulting in significantly higher depreciation in the earlier years? (A) Declining Balance Method (B) Straight Line Method (C) Sum of Years Digits Method (D) Units of Activity Method
C
63. Commodity purchases fluctuate m a spot market primarily because the demand is (A) dependent (B) independent (C) price elastic (D) price inelastic
C
70. HMX Inc. is considering investment in a new green site manufacturing facility. The facility is to be used for a high-value product with strong demand. The high production rate will require many low-value commodities to be sent to the facility on a continual basis. To benefit from low labor costs and tax incentives, HMX is planning to build the unit in one of four overseas developing countries, each of which is more than 1,000 miles from its eventual destination. Descriptions of the four sites and their transportation systems appear below in Figure 1: From an infrastructure perspective, which of these sites BEST fits the logistics needs of HMX? (A) Site I (B) Site II (C) Site III (D) Site IV
C
72. When moving from local sourcing to international sourcing, which of the following will MOST likely mcrease the total cost of ownership? (A) Cost of quality (B) Exchange rate (C) Goods shipping by water (D) Tariffs and duties
C
74. A Latin American consumer products company produces and sells computer keyboards to a British electronics retailer. The Latin American company purchases European marketing assistance from the British retailer. Both trading partners agree to pay for the majority of their purchases in cash, and fulfill their individual sales obligations to each other over a three-year period. This arrangement is BEST described as a (an) (A) bilateral contract (B) barter (C) counterpurchase (D) offset
C
76. An organization decides to move income from sales in other countries back to its home country, despite possible heavier tax levies, in order to increase available cash. This process is known as (A) ad valorem (B) duty drawback (C) profit repatriation (D) value-added
C
78. Customs brokers are typically used by supply management to reduce all of the following EXCEPT (A) amendments to documentation (B) audits by the Customs Service (C) goods lost during shipment (D) intensive shipment examinations
C
9. An in-depth analysis of a supplier's proposal is useful because it is important to understand the (A) SOW throughout the evaluation process (B) SOW throughout the proposal development process (C) supplier's proposal throughout the negotiation process (D) supplier's firm-fixed price
C
98. Partnerships and strategic alliances are typically characteristics of (A) local sourcing (B) multiple sourcing (C) single sourcing (D) sole sourcing
C
10. Which of the following is LEAST appropriate as an objective for negotiations? (A) Meeting the minimum essential needs of the organization (B) Maintaining control over contract performance (C) Determining the negotiation site (D) Ensuring the correct ratio of contract administrators to workers
D
13. A supply manager is negotiating a contract with a supplier to purchase one million components. To determine a pricing arrangement satisfactory to both parties, which of the following is LEAST appropriate? (A) Evaluating the supplier's current cost data (B) Establishing a cost goal (C) Reviewing the supplier's anticipated costs (D) Performing a make-buy analysis
D
20. The global commodity manager for manufacturer XYZ Inc. is conducting negotiations on a long-term contract with DEF, a key strategic supplier. DEF's delivery performance is rated at 73%, which is below the divisional goal of 98%. For this reason, XYZ's operations manager wants to drop DEF and find a new supplier. The commodity manager, however, is not in agreement with the operations manager, and notes that as part of the longterm agreement, DEF will provide a 15% cost reduction, which is critical to achieving the cost-reduction goal for the division for the current year. At this point, which of the following would be the MOST appropriate course of action for the commodity manager to take? (A) Move forward with the contract implementation, as negotiations with DEF have been taken in good faith. (B) Place contract negotiations on hold to validate the initial project scope on delivery and cost targets for DEE (C) Proceed with the contract implementation, but add a delivery performance clause to clarify the divisional goal. (D) Postpone contract negotiations to review the contract with the operations manager to ensure improved performance
D
24. A company hires a supplier to launch a website for a new product. The implementation is very successful, and the supplier would like to publicize its efforts in advertising and on its website, with testimonials from the buying company's employees. However, the contract prohibits this. Which of the following is the LEAST likely to be the reason for the company's position on this matter? (A) Other suppliers may seek endorsement from the company. (B) Employees might be targeted for sales pitches by the supplier's competitors. (C) The company has a policy of not endorsing suppliers. (D) The company plans to launch additional websites on its own.
D
28. A company plans to hire a consulting firm to implement a new employee_J?enefits website. Which of the following is MOST appropriate for this contract? (A) Cost plus pricing (B) Loss leader pricing (C) Market based pricing (D) Time and material pricing
D
3. When developing specifications, a buyer may consider information from which of the following? I. Suppliers II. Industry Standards III. Professional Organizations IV. Competitors (A) I and IV only (B) II and III only (C) I, II and III only (D) I, II, III and IV
D
42. XYZ Company is experiencing eroding margins for one of its key products. The company decides to commission a value analysis team to explore ways to reduce the cost of the product without degrading quality. Which of the following team composlt1ons would MOST likely meet these objectives? (A) Cost Accounting, Finance, Marketing, Manufacturing, Product Engineering (B) Cost Accounting, Finance, Marketing, Procurement, Product Engineering (C) Cost Accounting, Finance, Manufacturing, Procurement, Product Engineering (D) Cost Accounting, Manufacturing, Marketing, Procurement, Product Engineering
D
55. A supply manager for GHI Inc. completes a thorough financial analysis of Supplier A, which is one of only a few local firms that can supply certain products that are critical to GHI's manufacturing prc:cess. The supply manager finds some problems with Supplier Ns cash flow, but is otherwise satisfied with its quality and operations, and wishes to purchase its products. If GHI proposes to pay for the products five days after delivery rather than its customary 40-day term, this change will benefit Supplier A by favorably adjusting the (A) cost of goods sold (B) net profit (C) profit margin (D) time value of money
D
56. A supply manager contracts with an offshore supplier to manufacture widgets. The cost data are as follows: Item cost= $1.00 Freight cost = $ .12 Duties $ .11 In-transit storage=$ .10 What is the landed cost for a widget? (A) $1.12 (B) $1.22 (C) $1.23 (D) $1.33
D
62. The interest rate levels are most directly affected by fluctuations in whic~h of the following? (A) International currency exchange rates (B) The Dow Jones Industrial Average (C) The rate of business failures (D) The money supply
D
64. The consolidation of requirements from multiple buying organizations into a single large order to obtain quantity discounts is called (A) hybrid buying (B) center-led buying (C) commodity buying (D) cooperative buying
D
7. Which of the following is the LEAST critical element in a best alternative to a negotiated agreement (BATNA)? (A) Alternate products (B) In-house capabilities (C) Source options (D) Supplier capabilities
D
83. Integrity is BEST described as (A) always telling the truth (B) consistently making ethical choices (C) maintaining a good reputation (D) consistency between one's words and actions
D
84. A supply manager who receives information from a supplier that is clearly labeled as confidential should do which of the following? I. Use discretion in divulging the information to competing suppliers II. Divulge the information to competing suppliers if it is likely to produce a result favorable to the buyer's company (A) I only (B) II only (C) Both I and II (D) Neither I nor II
D
86. A commodity manager is attending a trade show in Europe. During a private conversation with a supplier, the supplier silently slides an envelope across the table toward the commodity manager. Which of the following is the MOST appropriate course of action for the commodity manager to take? (A) Pick up the envelope and look inside, as the supplier did not say what it contains. (B) Ask the supplier what is in the envelope before picking it up. (C) Ask the supplier to open and explain the contents of the envelope. (D) Leave the room and find a colleague to join the conversation.
D
89. To be a better corporate citizen and distinguish itself from the competition, a local moving and storage company has been striving to minimize its environmental impact by adopting a cradle-to-cradle design for waste minimization. Which of the following BEST exemplifies this principle? (A) Reusing pallets and shipping containers as often as possible (B) Reducing paper mailings by offering an "e-only" contact option for customers (C) Ensuring all cartons are made of recyclable cardboard (D) Using padding materials made of organic cellulose, which can be com posted
D
94. An organization has detailed policies and procedures for dealing with safe handling for a variety of materials, including potentially hazardous materials. In order to maintain employee awareness, which of the following is MOST important? (A) Reviewing and updating human resources reference materials regularly (B) Ensuring that records are retained securely and for the required period of time (C) Comparing the firm's safety performance to that of industry best practices (D) Conducting ongoing training and posting material safety data sheets (MSDS) as needed
D
