Final Exam

The supplier selection decision: A. can be depicted by a decision tree identifying options, evaluation criteria, and probabilities of success and failure. B. can be seen as a decision making process undertaken in an environment of certainty. C. is based on a uniform set of weighted criteria that can be applied to every purchase. D. should always be preceded by a formal supplier evaluation and rating. E. should be based on quantifiable factors such as price and delivery, and ignore social and political issues.

A. can be depicted by a decision tree identifying options, evaluation criteria, and probabilities of success and failure.

Identical prices received from various sources should : A. draw attention if it breaks with historical price behavior. B. only draw attention if the buyer is dissatisfied with the price quoted. C. always make the buyer suspicious of collusion. D. be expected when the specification is highly customized.

A. draw attention if it breaks with historical price behavior.

Social responsibility: A. extends beyond ethics to include community, environment, and human rights. B. refers to individual, not corporate, decisions and actions. C. is another name for ethics. D. is another name for supplier diversity programs. E. requires sacrificing financial gain for the greater good of the community.

A. extends beyond ethics to include community, environment, and human rights.

A supplier's references: A. may be useful if they are of similar size and objectives as the buyer's organization. B. are never completely trustworthy and therefore of little use. C. should always be in the same industry as the buying organization. D. should be ask closed-ended (yes-no) questions. E. are useful only to confirm factual information.

A. may be useful if they are of similar size and objectives as the buyer's organization.

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

A. means prices are set to cover direct costs, contribute to indirect, and attain a profit.

The Robinson-Patman Act basically requires that suppliers: A. must sell the same item, in the same quantity, to all customers at the same price. B. not talk with competitors about price. C. cannot meet to set the terms and conditions under which they will sell. D. meet competition, by adjusting price. E. use standard grade descriptions in advertising products.

A. must sell the same item, in the same quantity, to all customers at the same price.

When sourcing internationally: A. the buyer should learn about the culture, customs, norms, taboos, and history of the supplier's country. B. the need for personal space is generally the same in most regions of the world. C. the buyer should immediately establish an informal first-name basis with the supplier's representatives. D. the global availability and use of email, fax, and phone has largely eliminated communication barriers. E. differing cultural and social norms will have little impact since most businesspeople are accustomed to working with North Americans.

A. the buyer should learn about the culture, customs, norms, taboos, and history of the supplier's country.

The extent and depth of the analysis of potential suppliers is dependent on: A. the number of available suppliers. B. the expertise of the purchaser. C. the cost and importance of the item. D. the lead time available. E. all of the above.

A. the number of available suppliers. B. the expertise of the purchaser. C. the cost and importance of the item. D. the lead time available.

The fairest possible means of treating all suppliers alike in a competitive bidding situation is to: A. relate imaginary bids to give prospective suppliers a ballpark figure to work with. B. establish a policy of firm bidding. C. none of the above. D. allow for negotiation after all bids are received. E. allow all bidders to change their bids prior to the bid opening.

B. establish a policy of firm bidding.

Electronic or digital signatures for contractual purposes: A. are invalid in the U.S. because the UCC expressly prohibits them. B. have been given the same legal status as written ones by the European Union (EU), but must be approved by each EU government before going into effect. C. are valid in all member countries of the United Nations. D. are invalid because there is currently no technological means available to authenticate signatures. E. are valid in the U.S., Canada, and Mexico under the rules of origin of the NAFTA agreement.

B. have been given the same legal status as written ones by the European Union (EU), but must be approved by each EU government before going into effect.

Supply base rationalization: A. explains why a particular supplier has been chosen for a particular requirement. B. is an attempt to reduce the total number of suppliers to an organization. C. is an excuse by a supplier for poor delivery. D. is most appropriate when on-time delivery is the key issue. E. is a master scheme of categorizing suppliers by dollar volume and location.

B. is an attempt to reduce the total number of suppliers to an organization.

The United Nations Convention for the International Sale of Goods (CISG): A. is automatically applied if both nations have adopted the CISG, and there can be no exceptions. B. is automatically applied if both nations have adopted the CISG, unless another body of law is agreed upon in the contract. C. replaces the UCC as the worldwide body of law governing international buying. D. should always be the preference for a buyer from the United States. E. always puts the United States buyer at a disadvantage.

B. is automatically applied if both nations have adopted the CISG, unless another body of law is agreed upon in the contract.

Which of the following is a factor in determining the validity of a contract? A. employment in the purchasing department. B. legal subject matter or purpose. C. offer and counteroffer. D. incompetent parties. E. due process.

B. legal subject matter or purpose.

Activity based costing attempts to: A. turn direct costs into indirect costs by tracking the cost drivers behind direct costs. B. turn indirect costs into direct costs by tracking the cost drivers behind indirect costs. C. correct the distortions built into product costing by the way that direct costs are allocated. D. correct the distortions built into product costing by the way that the learning curve is applied to direct labor costs. E. introduce a new way to allocate direct costs that more accurately captures labor and material usage.

B. turn indirect costs into direct costs by tracking the cost drivers behind indirect costs.

Which of the following would be a situation that discouraged countertrade? A. desire to promote labor-intensive exports. B. well-developed domestic economy. C. shortage of available credit. D. need to develop export markets for new products. E. shortage of foreign exchange.

B. well-developed domestic economy.

A cash discount of 2/10, N/30 (2 percent cash discount if payment is made in 10 days, with the gross amount due in 30 days) is the equivalent of what approximate interest rate? A. 54 B. 45 C. 36 D. 30 E. 18

C. 36

To avoid risk, a buyer can: A. hedge in a commodities market. B. require bid or performance bonds. C. decide not to do business in certain countries. D. a and b. E. a, b, and c.

C. decide not to do business in certain countries.

The really knowledgeable buyer, in dealing with an international supplier: A. will normally price in the currency of the seller's country. B. will always state the price in U.S. dollars. C. may decide to deal in international currency options. D. will attempt to price in Euro Dollars. E. normally will attempt to negotiate a cost-plus-fixed-fee contract.

C. may decide to deal in international currency options.

In the portfolio matrix, characteristics of goods and services in the bottleneck quadrant are: A. substitution and switching is difficult, and few available suppliers can meet the technical or capacity needs. B. substitution and switching suppliers is possible, and several sources of supply are available. C. substitution and switching suppliers is difficult and few suppliers are available because of a unique specification. D. substitution is possible, switching suppliers is difficult, and many suppliers are available. E. substitution and switching suppliers is possible, and few suppliers have the technical expertise.

C. substitution and switching suppliers is difficult and few suppliers are available because of a unique specification.

Large suppliers: A. are most suited for small dollar value "C" requirements. B. usually represent very high risk to the purchaser. C. tend to have a strong financial base. D. should not be considered for longer term contracts. E. usually provide the greatest responsiveness and flexibility.

C. tend to have a strong financial base.

The legal authority of a salesperson normally is: A. the same as that of a buyer. B. based on the length of time the salesperson has been employed. C. to solicit orders and get ratification and acceptance from his or her employer. D. to make legally binding contracts for sales over $1,000. E. to make legally-binding contracts for $500 or less.

C. to solicit orders and get ratification and acceptance from his or her employer.

When a supplier offers a lower price for a larger quantity, the buyer should: A. order according to the EOQ model. B. determine the preference of senior management. C. never take the quantity discount. D. determine the return on investment. E. always take the quantity discount.

D. Determine the return on investment.

In international buying, the type of entity that normally assists in locating suppliers and handling documentation is a(n): A. import merchant. B. foreign import agent. C. sales agent. D. trading company. E. import broker.

E. import broker.

Sustainability is the ability to: A. sustain economic prosperity through long-term relationships with key suppliers. B. develop a supply base that meets requirements and protects natural systems. C. sustain long term bottomline growth with a stable supply base D. achieve economic prosperity and a higher quality of life and protect natural systems E. achieve economic prosperity for the company and avoid environmental litigation.

D. achieve economic prosperity and a higher quality of life and protect natural systems

Although associated with a number of factors, the learning curve normally is most closely identified with the analysis of: A. overhead costs. B. profit rates. C. direct material costs. D. direct labor costs. E. tooling costs.

D. direct labor costs.

Supply management's role in environmental considerations is: A. limited because environmental issues have little impact on the acquisition cycle. B. expanding because purchasing has primary responsibility for specification writing. C. limited by the product design developed by design engineers. D. expanding because the goal of zero environmental impact affects the acquisition cycle. E. limited to compliance with government laws and regulations concerning hazardous materials.

D. expanding because the goal of zero environmental impact affects the acquisition cycle.

Gifts and gratuities: A. can be accepted as long as the buyer's supervisor is informed of the action. B. of even a nominal nature inevitably lead to commercial bribery. C. no matter how small, cannot be justified in a well-run purchasing organization, and should never be accepted. D. given to buyers by suppliers may lead to the perception of bias or subjectivity in the purchasing process. E. are acceptable if the buyer receives them from an international supplier rather than a domestic one.

D. given to buyers by suppliers may lead to the perception of bias or subjectivity in the purchasing process.

When comparing the total cost of ownership from an international supplier to that of a domestic supplier, the international supplier's: A. prices are carefully controlled by the U.S. government to prevent dumping. B. lower labor costs offset the high cost of inefficient equipment and processes. C. price will be higher if the U.S. dollar is strengthening on the exchange rate. D. lower labor costs are easily offset by additional shipping and insurance costs. E. lower labor rates must be considered in the context of productivity and quality.

D. lower labor costs are easily offset by additional shipping and insurance costs.

When it comes to product liability, supply management: A. is responsible for establishing the cost of the actual damage. B. has responsibility only to the internal customer, not the final customer. C. is liable depending on the type of warranty agreed to in the contract. D. lowers risk by ensuring that suppliers deliver defect-free goods. E. has little or no role since this is essentially a legal action.

D. lowers risk by ensuring that suppliers deliver defect-free goods.

According to the UCC, an oral agreement: A. is never legally binding. B. may be revoked if the buyer sends a notice of objection within 30 days of receipt of the goods. C. that is partially performed (for example, one of ten lots is delivered) is automatically canceled under the doctrine of force majure. D. normally must include some written notation if the price of the order the sale of goods is $500 or more. E. is not valid unless and until some form of documentation is signed by both parties.

D. normally must include some written notation if the price of the order the sale of goods is $500 or more.

The Foreign Corrupt Practices Act (FCPA): A. allows foreign nationals to offer payments to U.S. government officials to expedite trade agreements. B. attempts to persuade other nations to adopt U.S. rules regarding payments to officials. C. allows U.S. firms to offer payments to officials of foreign governments to obtain special advantages. D. prohibits U.S. firms from making payments to obtain special advantages, but allows payment to facilitate the performance of normal duties. E. allows U.S. firms to prosecute foreign nationals on bribery charges.

D. prohibits U.S. firms from making payments to obtain special advantages, but allows payment to facilitate the performance of normal duties.

Both the Federal Trade Commission and the U. S. Department of Justice have: A. ruled that e-marketplaces are inherently susceptible to price-fixing and collusion. B. raised questions about e-marketplaces run by neutral third parties in which buyers pool their requirements for specific items, such as office supplies. C. yet to address the questions concerning e-marketplaces and price-fixing and collusion. D. raised questions about the potential for price-fixing and collusion in e-marketplaces. E. raised questions about a-marketplaces that are owned and operated by competitors who together represent more than 50 percent of an industry market share.

D. raised questions about the potential for price-fixing and collusion in e-marketplaces.

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

D. starts with the selling price of an organization's end product minus the operating profit to establish the target cost.

When there are no liens against the goods, and the goods are free from patent infringement, there is a(n): A. implied warranty of merchantability. B. implied warranty of fitness for a particular purpose. C. implicit warranty. D. warranty of title. E. express warranty.

D. warranty of title.

The governing convention on shipping terms and responsibilities involved in international transportation is called: A. ITAPS (International Transport and Payment Specifications). B. FCA (Free Carrier named place). C. FOB (Free on Board) terms. D. EXQ (Ex Quay). E. INCOTERMS (International Commercial Terms).

E. INCOTERMS (International Commercial Terms).

Which of the following statements supports multiple sourcing: A. an ongoing long-term contract exists with a preferred supplier. B. supply is plentiful and supply assurance is important. C. there is a patent involved. D. the order is small. E. concerns exist about supplier capacity for future volume.

E. concerns exist about supplier capacity for future volume.

The Sarbanes-Oxley Act: A. affects internal accounting procedures of privately-held companies. B. has no impact on the supply management process. C. requires supply management to report directly to the Chief Financial Officer. D. requires the Chief Purchasing Officer to sign off on every contract. E. requires listing off-balance sheet items such as long-term purchase agreements.

E. requires listing off-balance sheet items such as long-term purchase agreements.

The structure of global sourcing organizations: A. is most effective when it is centrally managed from the corporate headquarters. B. is least effective when it is centrally managed form the corporate headquarters. C. is least effective when it involves international purchasing offices. D. is most effective when it is decentralized out to the supplier's regional location. E. varies depending on the location of key suppliers and company operations.

E. varies depending on the location of key suppliers and company operations.

The Internet has made it just as easy to locate potential sources, find data, and evaluate international sources as domestic sources.

False

The process of attempting to determine all cost elements such as acquisition price, purchasing administration, follow-up, expediting, inspection and testing, rework, scrap, downtime, lost sales and customer returns is called: A. learning curve. B. competitive bidding. C. target pricing. D. activity-based costing. E. total cost of ownership.

total cost of ownership