SCM379 Final Exam Questions

63. FCA - Who pays: • Terminal handling charges at port of export? • Export clearance? • Transport cost up to the FCA delivery point (named place) or up to the main carrier' s receipt of the goods? • Airport charges and transport security fee?

Buyer, Seller, Seller, Buyer

1) Organizations operating under a just-in-time system, prefer to ship by: A) rail. B) same day air. C) truck. D) next-day air. E) intermodal carriers.

C) Truck

56) Value engineering (VE) and value analysis (VA) use the same methods, but VA is performed in the design stage and VE is performed in the redesign stage.

FALSE

57) FinTech firms assist manufacturers in the development and implementation of process technology innovation.

FALSE

65. FOB - Who pays Terminal Handling Charges (THC)?

Seller

67. FOB - Who pays for pre-carriage?

Seller

60. EXW - Must seller load on buyer's vehicle?

Seller does not load

14) Two effective logistics cost reduction strategies are partnering agreements with logistics services providers and long-term contracts.

TRUE

16) Transportation costs increase as distance, quantity, and speed increase.

TRUE

18) The cost per hundredweight (cwt) is generally higher for LTL shipments compared to TL shipments.

TRUE

19) Logistics is the management of inventory in motion and at rest.

TRUE

21) Logistics costs can be divided into three categories: inventory carrying costs, administrative costs, and transportation (with transportation costs accounting for the bulk of the costs).

TRUE

31) A cash discount of 1/15, N/30 (1 percent cash discount if payment is made in 15 days, with the gross amount due in 30 days) is the equivalent of what approximate interest rate? A) 24 percent. B) 30 percent. C) 36 percent. D) 45 percent. E) 54 percent.

A) 24 percent.

13) Transportation rates: A) are established primarily through negotiation. B) are lower for LTL than TL shipments. C) are established primarily by government regulation. D) typically decrease as delivery speed increases. E) typically do not change when smaller shipments are consolidated.

A) are established primarily through negotiation.

53) Although associated with a number of factors, the learning curve normally is most closely identified with the analysis of direct labor costs.

TRUE

55) In portfolio analysis, strategic goods and service are both more valuable to the buying organization and riskier to acquire.

TRUE

58) Target costing may result in company-wide cost reductions in design to cost, manufacture to cost, and purchase to cost.

TRUE

59) Life cycle costing can be used to justify the acquisition of expensive equipment on the basis of lower operating costs over the life of the asset.

TRUE

62. FCA - Who is bears the cost and risk of loading the goods at origin and unloading at the destination?

Seller assumes risk/cost at origin but the buyer must unload or when delivered to the first carrier

68. FOB - Must seller make sure that the goods are stowed/trimmed on board the ship?

Seller is responsible until goods loaded on the ship

32) The fairest possible means of treating all suppliers alike in a competitive bidding situation is to: A) establish a policy of firm bidding. B) allow all bidders to change their bids prior to the bid opening. C) allow for negotiation after all bids are received. D) give prospective suppliers target cost. E) none of the above because competitive bidding is not fair.

A) establish a policy of firm bidding.

24) If the delivery date is some months or years away and if there is substantial chance of price escalation, a supplier may feel that there is far too much risk of loss to agree to sell under a: A) firm-fixed-price plus incentive fee (FFPIF). B) firm-fixed-price (FFP). C) cost-no-fee (CNF). D) cost-plus-fixed-fee (CPFF). E) cost-plus-incentive-fee (CPIF).

B) firm-fixed-price (FFP).

3) Compared to other modes of transportation, motor carriers provide the advantage of: A) low variable operating costs. B) flexibility of point-to-point service. C) energy efficiency. D) low variable operating costs and flexibility of point-to-point service. E) flexibility of point-to-point service and energy efficiency.

B) flexibility of point-to-point service.

25) This bond guarantees work will be done according to specifications, in the time specified, and if another supplier does rework or completes the order, purchasing is indemnified for these extra costs. A) bid bond. B) performance bond. C) lien bond. D) payment bond. E) surety bond.

B) performance bond.

47) In portfolio analysis, the goal when purchasing bottleneck items is to: A) assure quality at expected levels. B) reduce or eliminate customization. C) assure lowest total cost of ownership. D) minimize acquisition time and cost. E) minimize price per unit.

B) reduce or eliminate customization.

12) With deregulation of the transportation industry and the development of intermodal service, the focus for the transport buyer is: A) selecting the best mode of transport. B) the carrier's ability to handle multiple parts of the logistics process. C) procuring logistics services at the lowest rates. D) bringing all logistics activities under the management of the VP of Supply. E) shifting responsibility for shipper-carrier relationships to the carrier.

B) the carrier's ability to handle multiple parts of the logistics process.

34) Hedging is a way to: A) ensure lowest price. B) try to minimize price and currency exchange risks. C) minimize collusive bidding. D) set trade discounts. E) evaluate quantity discounts.

B) try to minimize price and currency exchange risks.

69. CIF - Who pays terminal handling charges (THC) in port of arrival?

Buyer

46) In portfolio analysis, cost analysis can be used in the acquisition of strategic goods or services to identify opportunities to: A) divide the spend for the item or service among multiple suppliers. B) avoid, eliminate or reduce costs in supplier switching costs. C) avoid, eliminate or reduce costs in buyer and supplier cost structures. D) avoid, eliminate or reduce costs in the supplier's cost structure. E) avoid, eliminate or reduce costs in the buyer's cost structure.

C) avoid, eliminate or reduce costs in buyer and supplier cost structures.

27) Items for which prices are comparatively low and the cost of price reduction efforts may exceed any price savings realized are: A) parts, components, and packaging. B) raw materials. C) maintenance, repair, and operating supplies. D) services. E) capital assets.

C) maintenance, repair, and operating supplies.

41) Portfolio analysis is: A) a method of multiple sourcing. B) a method of identifying substitute materials. C) the categorization of spend map based on the risks to acquire in the marketplace and value. D) a method of multiple sourcing and the categorization of spend map based on the risks to acquire in the marketplace and value. E) a method of multiple sourcing, a method of identifying substitute materials and the categorization of spend map based on the risks to acquire in the marketplace and value.

C) the categorization of spend map based on the risks to acquire in the marketplace and value.

28) A cash discount allows: A) the seller to secure prompt payment, but has no benefits for the buyer. B) the buyer to pay a lower price per unit, but has no benefits for the seller. C) the seller to secure prompt payment and the buyer to pay a lower price per unit. D) the seller to demand payment in cash on demand (C.O.D.) upon receipt of goods. E) the buyer to always calculate the discount based on the delivery date.

C) the seller to secure prompt payment and the buyer to pay a lower price per unit.

43) Cost management tools and techniques that may provide data for negotiations with internal organizational stakeholders and/or externally with suppliers include: A) activity-based costing. B) the learning curve. C) total cost of ownership. D) activity-based costing and total cost of ownership. E) activity-based costing, the learning curve and total cost of ownership.

E) activity-based costing, the learning curve and total cost of ownership.

11) Decreasing total business logistics costs as a percentage of the U.S. GDP may be attributed to: A) deregulation of the transportation sector. B) an increase in global supply chains. C) improved logistics technology systems and e-commerce. D) deregulation of the transportation sector and an increase in global supply chains. E) deregulation of the transportation sector, and improved logistics technology systems and e commerce

E) deregulation of the transportation sector, and improved logistics technology systems and e commerce

49) Purchasers can use activity-based costing to: A) eliminate non-value adding activities. B) reduce activity occurrences. C) reduce the cost driver rate. D) eliminate non-value adding activities and reduce the cost driver rate. E) eliminate non-value adding activities, reduce activity occurrences and reduce the cost driver rate.

E) eliminate non-value adding activities, reduce activity occurrences and reduce the cost driver rate.

39) When estimating the cost structure of a manufacturing supplier: A) material costs are difficult to estimate. B) direct labor costs are the easiest costs to estimate. C) prices of raw materials are not commonly accessible. D) labor rates are typically uniform across different plant locations. E) equipment depreciation is typically the largest cost element in overhead.

E) equipment depreciation is typically the largest cost element in overhead.

22) The cost approach to pricing: A) is the only defensible pricing mechanism for ethical companies to use. B) implies that prices are set based on the cost the market will bear. C) means prices are adjusted to ensure the selling organization recoups all costs. D) implies that cost analysis is the only technique to be used to negotiate prices. E) means prices are set to cover direct costs, contribute to indirect costs, and provide a profit

E) means prices are set to cover direct costs, contribute to indirect costs, and provide a profit

26) When using competitive bidding to determine prices, the purchaser should ensure that the bidders are: A) qualified to make the item or service in accordance with the buyer's specifications and able deliver it by the desired date. B) sufficiently reliable. C) numerous enough to ensure a truly competitive price. D) qualified to make the item or service in accordance with the buyer's specifications, able deliver it by the desired date and sufficiently reliable. E) qualified to make the item or service in a accordance with the buyer's specifications, able deliver it by the desired date, sufficiently reliable and numerous enough to ensure a truly competitive price.

E) qualified to make the item or service in a accordance with the buyer's specifications, able deliver it by the desired date, sufficiently reliable and numerous enough to ensure a truly competitive price.

33) If identical bids are received, the buyer might choose to: A) reject all bids. B) initiate an investigation. C) negotiate with one or more suppliers. D) reject all bids and initiate an investigation. E) reject all bids and negotiate with one or more suppliers.

E) reject all bids and negotiate with one or more suppliers.

4) A transportation strategy should include consideration of: A) safety on the ground, in the air and on water. B) environmental factors, such as pollution. C) consolidation of freight. D) alternative transport modes. E) safety on the ground, in the air and on water, environmental factors, such as pollution, consolidation of freight and alternative transport modes.

E) safety on the ground, in the air and on water, environmental factors, such as pollution, consolidation of freight and alternative transport modes.

50) Common method(s) of analyzing total costs of ownership (TCO) include: A) standard cost models. B) unique cost models. C) segregating costs on the basis of pretransaction, transaction and post-transaction costs. D) standard cost models and segregating costs on the basis of pretransaction, transaction and post-transaction costs. E) standard cost models, unique cost models and segregating costs on the basis of pre-transaction, transaction and post-transaction costs.

E) standard cost models, unique cost models and segregating costs on the basis of pre-transaction, transaction and post-transaction costs.

30) The lowest bid may not receive the order if: A) the buyer discovers the lowest bidder is unreliable. B) the lowest bid is higher than the buyer believes justifiable. C) there is reason to believe the bidders colluded. D) the lowest bid is higher than the buyer believes justifiable and there is reason to believe the bidders colluded. E) the buyer discovers the lowest bidder is unreliable, the lowest bid is higher than the buyer believes justifiable and there is reason to believe the bidders colluded.

E) the buyer discovers the lowest bidder is unreliable, the lowest bid is higher than the buyer believes justifiable and there is reason to believe the bidders colluded.

6) Integrated carriers (truck-air), such as UPS and Federal Express, are able to capture a larger market share because they: A) utilize their own aircraft. B) have extensive ground networks. C) have accurate, real-time logistics tracking systems. D) have extensive ground networks and have accurate, real-time logistics tracking systems. E) utilize their own aircraft, have extensive ground networks and have accurate, real-time logistics tracking systems.

E) utilize their own aircraft, have extensive ground networks and have accurate, real-time logistics tracking systems.

9) The selection of the FOB point is important to the purchaser, because it determines: A) who pays the carrier. B) when legal title to goods being shipped passes to the buyer. C) who is responsible for preparing and pursuing loss or damage claims. D) who routes the freight. E) who pays the carrier, when legal title to goods being shipped passes to the buyer, who is responsible for preparing and pursuing loss or damage claims and who routes the freight.

E) who pays the carrier, when legal title to goods being shipped passes to the buyer, who is responsible for preparing and pursuing loss or damage claims and who routes the freight.

15) Third-party logistics service providers (3PLs) are carriers that always own assets (trucks, airplanes, railcars) and act as intermediaries between trading partners, for example, shippers and carriers.

FALSE

17) Truckload (TL) shipments are typically for short haul distances compared to less-than truckload (LTL) shipments.

FALSE

20) Marine transport is best suited for products of high value and/or extremely perishable

FALSE

35) Indirect costs can be specifically and accurately assigned to a given unit of production or a specific identifiable task performed by a service provider.

FALSE

36) An escalator clause provides for an increase, but not a decrease, in price if costs change.

FALSE

37) Accepting a price discount for ordering larger quantities leads to lower levels of anticipation inventory.

FALSE

38) Online reverse auctions are useful means of price determination for customized items.

FALSE

52) Qualifying sources is an example of a post-transaction cost phase in the total cost of ownership model.

FALSE

54) In portfolio analysis, bottleneck items are characterized by high risk and high value.

FALSE

72. In terms of cost and responsibility, the easiest Incoterms® Rule for the exporter which is, in turn, the most difficult for the importer is a. Delivered At Place (DAP). b. Ex-Works (EXW). c. Delivered Duty Paid (DDP). d. Free On Board (FOB). e. Cost and Freight (CFR).

b. Ex-Works (EXW).

73. Under the Cost, Insurance, and Freight Incoterms® Rule, a. the importer must pre-pay the insurance. b. the insurance must total at least 110 percent of the value of the goods. c. the importer pays all shipping costs, including on carriage. d. All of the above e. None of the above

b. the insurance must total at least 110 percent of the value of the goods

74. The choice of a proper Incoterms® Rule is a critical decision because a. it can be an integral part of export b. it is linked to the level of customer service c. it can be a competitive advantage. d. All of the above strategy. e. None of the above the firm is attempting to provide.

d. All of the above strategy.

71. Incoterms® Rules stands for a. terminal incorporation procedures. b. in-country termination. c. international company terminology. d. intercontinental term standards. in-country termination. e. international commerce terms.

e. international commerce terms.

66. FCA - Where does the transfer of risk take place?

When the seller transfers goods to first shipper/carrier

61. EXW - What happens if seller assists with the loading anyway?

At buyers own risk

10) A straight bill of lading : A) is used when the goods have been paid for in advance of shipment and requires delivery. B) is a negotiable instrument that can be used when goods are purchased on credit. C) is used to indicate that cargo was loaded onto a named vessel in good condition. D) is used when the goods have been paid for in advance of shipment and requires delivery, and is a negotiable instrument that can be used when goods are purchased on credit. E) is a negotiable instrument that can be used when goods are purchased on credit and is used to indicate that cargo was loaded onto a named vessel in good condition.

A) is used when the goods have been paid for in advance of shipment and requires delivery.

40) The goal of value engineering and value analysis is to: A) perform a function at the same or an improved level while reducing costs. B) analyze the value-added from engineering services and production. C) analyze functions to satisfy all needed quality requirements at any cost. D) define value of a function in technically accurate and precise language. E) perform a function at an improved level at the same cost.

A) perform a function at the same or an improved level while reducing costs.

45) Purchases categorized as leverage items in portfolio analysis have the following characteristic(s): A) standard specification or commodity-type items. B) switching suppliers is difficult. C) supplier technology is important. D) standard specification or commodity-type items and supplier technology is important. E) standard specification or commodity-type items, switching suppliers is difficult and supplier technology is important.

A) standard specification or commodity-type items.

51) Target costing starts with: A) the selling price of an organization's end product minus the operating profit to establish the target cost. B) the supplier's price, and works to determine the selling price of the buying organization's end product or service. C) the supplier's price, and works to determine the supplier's true cost structure. D) the buyer's lowest reasonable price target, and works to a negotiated price agreed on by the buyer and the supplier. E) the selling price of an organization's end product minus actual manufacturing, overhead, and materials costs to determine operating profit.

A) the selling price of an organization's end product minus the operating profit to establish the target cost.

2) Fuel efficiency and energy consumption considerations: A)are a factor in transportation strategy development in many organizations. B)have no impact on transportation strategy in most organizations. C)encourage shippers to focus on increasing LTL shipments. D)lead to disintermediation in the supply chain. E)result in lower use of third party logistics providers.

A)are a factor in transportation strategy development in many organizations.

7) Marine transportation is: A) best suited for hauling large tonnage over long distances. B) disadvantaged because of the need for suitable networks, which are dependent on government support. C) not well suited for hauling commodities. D) best suited for hauling large tonnage over long distances and disadvantaged because of the need for suitable networks, which are dependent on government support. E) disadvantaged because of the need for suitable networks, which are dependent on government support and not well suited for hauling commodities.

D) best suited for hauling large tonnage over long distances and disadvantaged because of the need for suitable networks, which are dependent on government support.

23) Labor and material costs are typically: A) semi-variable costs. B) fixed costs. C) indirect costs. D) direct costs. E) semi-variable costs and fixed costs.

D) direct costs

42) When cost analysis is applied to a supplier's price, the buyer: A) identifies a cost reduction target with no insight into specific cost elements. B) relies on supplier information about areas where it can cut costs. C) recognizes that little cost data is available for most cost elements. D) identifies and analyzes each cost element for cost reduction opportunities. E) cannot expect any assistance from the supplier.

D) identifies and analyzes each cost element for cost reduction opportunities.

29) Costs incurred in the operation of a production plant or process, but normally cannot be related directly to any given unit of production or service provided, are called: A) direct costs. B) variable costs. C) semivariable costs. D) indirect costs. E) fixed costs.

D) indirect costs.

5) Compared to motor carriers, rail: A) is relatively inflexible and slow. B) has higher damage rates. C) is less attractive for hauling large tonnage over long distances. D) is relatively inflexible and slow, and has higher damage rates. E) is relatively inflexible and slow, has higher damage rates and is less attractive for hauling large tonnage over long distances.

D) is relatively inflexible and slow, and has higher

48) Life cycle costing (LCC): A) includes all relevant costs expected in the first three years of ownership. B) focuses on purchase price that is typically the highest percentage of LCC. C) shows the phases of product evolution from growth to maturity. D) may include costs that are 10-15 years in the future and highly uncertain. E) can be applied to all types of purchases except capital acquisitions.

D) may include costs that are 10-15 years in the future and highly uncertain.

8) Demurrage charges: A) are never legitimate because delays are typically caused by the carrier's actions. B) are insignificant and can easily be justified in the buying organization. C) discourage the buyer from using a particular carrier. D) may indicate poor delivery scheduling on the part of the buying organization. E) are growing because of the lengthy delays in most supply chains.

D) may indicate poor delivery scheduling on the part of the buying organization.

44) A purchasing approach to minimize the acquisition costs and rely on competition to keep prices low is best suited for: A) bottleneck items. B) strategic items. C) leverage/commodity items. D) noncritical/routine items. E) bottleneck items and strategic items.

D) noncritical/routine items.

64. FCA- Is seller obligated to stow the goods in buyer's container upon delivery on seller's location?

Seller not obligated

70. While on the surface Incoterms® Rules determine who pays what when, ultimately the directly or indirectly pay(s) the costs of transportation and international shipping. a. importer b. exporter c. customs office d. All of the above e. None of the above

a. importer