BADM 324 Exam 1

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

A

If the buyer wants to motivate the seller to manage total costs, the best type of contract is: A. cost-plus-incentive-fee (CPIF) B. cost-plus-fixed-fee (CPFF) C. cost-no-fee (CNF) D. firm-fixed-price (FFP) E. Both A and B

A

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

A

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 annual interest rate? A. 24%. B. 30%. C. 36%. D. 54%. E. 45%.

A

Taco stand owner at a football game sells a taco for $1. He has a revenue sharing contract with the supplier. He pays $0.20 to buy each unit of taco from supplier, but needs to pay supplier 30% of revenue for each unit of taco sold. Unsold taco is useless. What is the service level? Service level = understock cost / (understocking cost+ overstocking cost) A. 71% B. 39% C. 90% D. 50% E. 62.5%

A

In statistical process control (SPC), special or assignable causes of variation: A. can be present in a process that is fully capable of meeting specifications consistently. B. are outside and nonrandom problems such as the breakdown of machinery, material variation, or human error. 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. are intrinsic to the process and will always be there unless the process is changed.

B

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 lose the company $840 per year. B. buying 100 at a time will save the company $2,130 per year. C. buying 100 at a time will save the company $3,600 per year. D. buying 100 at a time will save the company $2,260 per year. E. buying 100 at a time will save the company $1,260 per year.

B

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

B

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

B

A mode of transportation is: A. a private business that trucks goods from point A to B. B. a transportation provider that moves goods and/or passengers. C. the means by which people, freight or information gain mobility. D. the means by which tangible goods gain mobility. E. Burlington Northern Santa Fe Railway (BNSF).

C

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

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

C

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

C

Most direct costs are: A. fixed costs. B. overhead costs. C. semivariable costs. D. variable costs. E. general and administrative costs.

D

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

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

C

A six sigma (6σ) approach to quality: A. means there are no more than 6 defects per million opportunities B. has no connection to the concept of zero defect. C. was developed by Japanese companies in the 1950s. D. has soft goals such as happier customers and employees. E. focuses on preventing defects by using data to reduce variation and waste.

E

A third party logistics (3PL) services provider: A. handles physical movement of goods, but does not perform administrative tasks. B. handles only administrative tasks such as auditing and billing. C. is a separate entity that provides management of inbound and outbound goods. D. a subcontractor working with a prime logistics services provider. E. is a separate company from the buyer's and supplier's organizations.

E

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. continuing to buy B. privatizing C. continuing to make D. insourcing E. outsourcing

E

When developing supply strategies, the supply manager must determine: A. how well it should be made. B. who should make it C. how it should be made. D. what to make or buy. E. all of above.

E

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

E

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

E

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

D

Supply strategies that are based on changes in demand and supply are known as: A. cost-reduction strategies. B. environmental-change strategies. C. supply chain support strategies. D. assurance-of-supply strategies. E. risk-management strategies.

D

Anticipation inventories are carried: Answers: A. to protect against machine breakdown. B. to permit activities on either side of a major process. C. to protect against uncertainties in supply and demand. D. to stock the distribution pipelines. E. to cover a well-defined future need.

E

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: firm-fixed-price (FFP) B. firm-fixed-price plus incentive fee (FFPIF) C. cost-no-fee (CNF) D. cost-plus-incentive-fee (CPIF) E. cost-plus-fixed-fee (CPFF)

A

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

A

Organizations operating under a just-in-time system, require: A. on-time deliveries. B. heightened security. C. international coverage. D. real-time package tracking. E. lowest price.

A

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

A

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, damn lies, and statistics."

C

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. may reduce or control operating costs, improve focus on core competencies, and gain access to world-class capabilities. D. is a low risk venture because the firm can always revert back to performing the function in-house at low cost. E. usually results in increased hiring to attain expertise that the organization does not already possess.

C

Decreasing logistics costs may be attributed to: A. deregulation of the transportation sector. B. technology advances and e-commerce. C. an increase in global supply chains. D. A and B. E. B and C.

D

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

D

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

D

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 qualitative forecasting technique. B. a time series forecasting technique. C. a deterministic model. D. a causal model. E. a repetitive pattern modeling tool.

D

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

D

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

Determination of the "best buy" is based on: A. the internal user or specifier's perceptions. B. suitability for a given use. C. a balance between price and quality. D. technical considerations only. E. trade-offs among stakeholders (e.g., marketing, operations, and supply.)

E

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

E

The key question in strategic supply management is: A. How can the supply manager develop a network of suppliers that contribute to the supply department's goals? B. How can first tier suppliers contribute to the buying organization's objectives and strategy? C. How can supply strategy be kept separate from, but equal to, organizational strategy? D. How can first, second, and subsequent tiers of suppliers contribute to the buying organization's objectives and strategy? E. How can supply and supply chains contribute effectively to organizational objectives and strategy?

E

Supply strategies that are designed to anticipate and recognize shifts in the economy, organization, people, laws, regulations, and systems availability are: A. internal management strategies. B. supply assurance strategies. C. environmental change strategies. D. change management strategies E. total cost strategies.

C

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

A

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

A

Strategies designed to make available the knowledge and capabilities of supply chain members to others in the buying organization are called: A. supply-chain-support strategies. B. risk-management strategies. C. environmental-change strategies. D. cost-reduction strategies. E. assurance-of-supply strategies.

A

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

B

Taco stand owner at a football game sells a taco for $1. He pays supplier $0.50 for each unit. The supplier promises to buyback any unsold taco for $0.20. What is the service level? Service level=understock cost / (understocking cost+ overstocking cost) A. 50% B. 62.5% C. 39% D. 90% E. 71%

B

The market approach to pricing: A. implies that market analysis is the only technique that should be employed to negotiate prices. B. implies that prices are set based on what the market will bear. C. means that prices are adjusted regularly to ensure that the seller recoups all its marketing costs. D. is the only defensible pricing mechanism for ethical companies to use. E. means prices are set to cover direct costs, contribute to indirect, and attain a profit.

B

When a supply-related risk exists, the supply management team should: A. confer with relevant parties, provide requested data, and implement senior management's mitigation strategy. B. identify and classify risks, assess possible impact, and develop a mitigation strategy. C. review the existing risk mitigation plan, suggest revisions, and await instructions. D. inform the chief supply officer, await instructions, and implement the directive. E. seek input from other functional areas, compile the ideas, and submit them to senior management.

B

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

E

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

E

Deciding what represents a core competency in an organization is: A. a decision best left to the organization's Board of Directors. B. a fairly easy decision once organizational goals and objectives are known. C. always the same for companies in the same industry. D. a decision best left to the Chief Executive Officer. E. often a fairly complex decision and a function of many factors.

E

Decoupling inventories are carried: A. to protect against uncertainties in supply and demand. B. to stock the distribution pipelines. C. to cover a well-defined future need. D. to protect against machine breakdown. E. to permit activities on either side of a major process.

E

One of the most fundamental and critical decisions in any organization is, should we: A. order small quantities to avoid carrying costs or large quantities for volume discounts? B. form a strategic partnership with a single source or split the order to foster competition? C. source locally or globally? D. have a single source or multiple for a specific purchase? E. make or buy the needed good or service?

E

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

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

E

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

E

A strategy is: A. an action plan to achieve specific operational and tactical goals. B. a vision of the future of an organization. C. a procedure for allocating resources among functions in the organization. D. an action plan to achieve specific long-term goals and objectives. E. an action plan to maximize rewards in the current period in return for big risks.

D

Supply strategies that are designed to exploit market opportunities and organizational strengths to give the buying organization an advantage in the marketplace are known as: A. assurance-of-supply strategies. B. risk-management strategies. C. cost-reduction strategies. D. competitive-edge strategies. E. supply chain support strategies.

D

The answer to the question, "How much to buy?" depends on: A. trends in inventory management. B. the relative power of each supply chain member. C. decisions made inside the first tier supplier. D. the level of uncertainty throughout the supply chain. E. decisions made inside the buying organization.

D

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

D