1. Researching market conditions helps to improve 6. Which of these are variable costs?

negotiations with suppliers by providing the buyer a) Staff overtime

with. b) Premises cost
a) Up to date technical information on the c) Insurance costs
product d) Materials cost
b) Details of what pricing other companies are a. 1 and 2 only
b. 1 and 4 only
offering
c. 2 and 3 only
c) Information on the standards applied to the
d. 2 and 4 only
product
d) Details of trade fairs the supplier is attending
7. Planning the design of a new school, an architectural
company is Keen to specify the exact material
2. The main benefits of using standards in a
requirements for a science laboratory but allow some
specification are.
flexibility in the construction of the classrooms for the
a. British standards are aligned with other
use of sustainable materials.
international standards
b. It provides a clear guide with no ambiguity or Which specification type should be used for the
uncertainty science lab?
c. It accurately reflects the buyers' requirements a. Prescriptive
for the supplier b. Performance
d. It will specify the latest technology standards c. Design
are kept up to date d. Functional

3. Comparing what something should have cost with 8. A supermarket is intending to invest in it's links to
what it has actually cost is known as the supply chain via e-procurement to help ensure it
a. Variance analysis meets daily typical consumer stock requirements. How
b. Supplier analysis could e-procurement best help to control spend and
c. Cash-flow analysis help towards achieving this goal?
d. Profit and loss analysis a. Share sales trend to manage Stock
b. Set up standardized repeat orders
c. Monitor and minimise deliveries
4. Which of the following provides the buyer with the d. Monitor regional spend trends
greatest negotiating advantage?
a. Product is in short supply and high demand
b. Product is freely available from multiple 10. A house builder has requested use of a sustainable
suppliers low carbon cladding material to be procured at a
c. Product is seasonable and in season competitive rate within the project budget. Who
d. Product is in stock with a single supplier would be the key internal stakeholder in defining the
business requirement
A. Commercial team
5. Which of these have negative effect on cash-flow? B. Procurement team
1. A supplier reduces it's payment terms C. Environmental Team
2. The bank grants a loan to the company D. Design team
3. A customer agrees upon purchase
4. Increase in the amount of stock held 11. The buyer's database is regarded as a primary data
a. 1 and 4 only source. Which of the following is also a source of
b. 2 and 3 only primary data?
c. 2 and 4 only
d. 3 and 4 only
 a. Price lists collected from supplier's 15. Robert is a buyer at Pickton's farm product, a
representatives at trade fairs manufacturer of food products that are sold to
b. Price listings on comparison websites and supermarkets. Robert will be sourcing from local
market exchanges farmers to supply PSP with raw materials for PFP's
c. Published economic indices such as retail price product.
index(RTI)
d. d. Financial and trade press. including journals What is the major supplier chain risk that Robert needs
from Professional bodies to be aware of which is specific to this market?

a. Extreme or unexpected weather conditions may

12. A benefit (to the specifying company) of using affect supplier's ability to supply PFP in line with
performance specifications to communicate quantity and timing requirements
requirement to potential suppliers is that 16. Albert has recently joined fish industries as a buyer.
a. Supplier quotations and proposals are easy for He has been instructed to negotiate with a number of
a buyer to compare as supplier innovation is suppliers to strengthen the suppliers payment terms
discouraged from 30 days to 60 days. Why would FI want to
b. the risk of not meeting the specification sits lenghten suppliers' payment terms?
with the supplier and must be rectified at a. It will reduce the amount of paperwork
theirtime and cost required
c. a performance specification saves time by b. It will improve the relationship between FI and
limiting the number of suppliers that can it's suppliers
provide quotation c. It will improve FI's negotiating position for
d. the use of brand names allows the specifying future negotiations
company to precisely describe their d. It will improve FI's cash flow position
requirements

17. Use of international standards in specification is

13. What is the disadvantage of sourcing from a useful when
supplier which is a monopoly in the market? a. the purchasing organisation does not know the
a. The buyer will not be able to buy the quantity quantity of goods it requires
required b. The goods needs to meet international quality
b. The buyer has a lack of negotiating power on levels to be sold onward
cost c. the goods will only be sold in the domestic
c. The buyer will be unable to effectively manage market of the purchasing company
the contract d. the purchasing company is using e-auction to
conduct the sourcing process.
14. What is the difference between value analysis and
value engineering? 18. The role of the marketing function in the
a. Value analysis is conducted by the end user of the development of specifications is
goods or services, whereas value engineering is a. To ensure the organisation gains competitive
conducted by the supplier of goods and services. advantage in the product features
b. Value analysis is used for existing goods or b. to ensure that the design department is
services whereas value engineering is conducted discouraged from using conformance
at the design stage of new goods and services. specification
c. value analysis is used for service requirements c. to coordinate the stakeholders because the
whereas value engineering is used for goods or procurement team is less suited for this role
products. d. to ensure that the brand name is given
d. Value analysis is used in the public sector only precedence over the technical aspects of the
whereas value engineering is used in the private specification
sector only
19. Standards are documents that stipulate minimum 1. There is potential for backward integration
levels of performance and quality of goods and 2. Products and services are undifferentiated
services. However, standards have some disadvantages 3. Demand is price sensitive
of which one is that…. 4. There are low switching costs
a. 1and 4 only
b. 2 and 3 only
a. standards encourage variety proliferation, c. 3 and 4 only
confusion and uncertainty among producers, d. 1 and 2 only
suppliers and users
b. standards increase the processing time and cost as
each user prefers his/her own standard 23. Suppliers are powerful in which of the following
c. Standards focus on technical parameters and they situations?
disregard all environmental requirements 1. There are potential for backward integration
d. Standards tend to be static and they fail to reflect 2. Products and services are undifferentiated
the latest technology or performance practices 3. The switching costs for buyer's is high
4. There are few substitute products
a. 1and 4 only
20. The buyer for WTZ Company is considering using b. 3 and 4 only
conformance Specification for the new requirement c. 1 and 2 only
from the technical department. To be effective in this d. 1 and 3 only
approach, the buyer needs to be fully aware of the
features of conformance such as
24. Variances are the difference between the budgeted
a. A greater share of the conformance
costs and the actual costs.
specificationrisk is borne by the suppliers if it
When are material cost variances likely to arise?
turns out to be unfit for the purpose
b. The buyer must ensure that the conformance
1. When the actual costs are entered as they occur
specification is flawless and sufficiently clear
against the budget amount
for the suppliers to act on
2. When the supplier's system displays prices on the
c. Conformance specifications will encourage
invoices but not on the delivery notes
suppliers to develop innovative solutions for
3. When the new financial accountant misplaces a
the customer
batch of unprocessed goods received notes
d. the buyer does not need technical expertise
4. When the supplier changes from manual to
indeveloping a functional conformance
electronic invoicing systems for all transactions
specification

21. Buyers can ascertain the prices by examining a. 1 and 2 only

information provided by primary and secondary b. 2 and 3 only
sources of market data which of the following is a c. 1 and 3 only
d. 2 and 4 only
secondary source of market data
a. Supplier prices provided on price comparison
website
b. Historical records of supplier prices on the
buyer's database
c. Price brochures provided by the supplier's
sales team
d. Supplier's prices provided on the buyer's
request for quotation

22. Which of the following are threats to substitute in

Porter's five forces model
25. One of the competitive forces known to influence
markets is referred to as threats of new entrants which 29. Which of these are advantages of using a
can be explained as.. conformance specification? Select two that apply
a. Check the supplier database to identify other
a. Enabling supplier flexibility and innovation
suppliers to compete in the next tender when the
b. Enabling value for money solutions
current contract expires
c. Forces consideration of actual needs
b. suppliers from small and medium enterprises
d. Evidence of requirements in dispute
seeking recognition by threatening legal action
e. A smaller supplier base to select from
c. The buyer changing from single to dual sourcing
approach whereby the second best bidder 30. Which of these purchases by a furniture
becomes an alternative supplier manufacturer company are direct costs to the
d. suppliers striving to penetrate the market through company! Select two that apply
such strategies as innovation and aggressive
competition
a. Salary of the office accountant
26. Which of the following would allow an established e. Wages paid to the production line employees
company to develop a competitive advantage over b. Utility bill from electric provider
new entrants to it's market? c. Purchase of the wood for furniture production
a. Reduce advertising costs d. Advertising in a home interiors magazine
b. Economics of scale
31. A large retail firm is seeking to expand further into
c. International management re-organisation
online shopping with the current ratio being 85% shops
d. Selling only imported goods
and 15% online. The procurement manager has
27. If established suppliers in a market start a price suggested that benchmarking against a larger online
war, is this a form of competitive rivalry? supplier would be useful.

Is the procurement manager correct to suggest this?

a. Yes, economies of scale are a barrier to entry of a. Yes because it will demonstrate how and where
new entrants performance levels need to be achieved
b. No, it makes the supplier more powerful, they b. No, because the company aren't ethically allowed
force prices down in a price war to carry this type of analysis out
c. No, the volume purchased by the buyer or industry c. Yes because the company can copy their
is not important production. strategy to improve sales
d. Yes. it is an aggressive strategy, one firm's gain is
32. Raheem is the head of procurement at a Care
another firm's loss
home. He decides to use a performance specification
28. Is ISO 14000 a series of environmental standards? for the purchase of a new intelligent patient record IT
a. No, it's series of quality standards system. Is this a correct approach?
includingcontinous improvement
a. Yes. as it helps to drive innovation
b. Yes, it's series on environmental
standardsincluding life cycle analysis
c. Yes, its series of information security
standardsincluding financial information.
d. No, it's series of risk management
standardsincluding achieving objectives
 b. Yes, as it tells the supplier the exact requirement 37. Which of the following are advantages of using
c. No, the approach is difficult to manage standards within a specification?
d. No, it will take too long to acquire the IT system 1. Remove ambiguity of requirements
2. Assists negotiations with suppliers
33. When studying whole life costing, Melissa is 3. Assist accurate comparison of bids
reviewing end of life costs. Which of the following 4. Increased time of market
factors relate to end of life? Select two that apply
a. 1 and 4 only
a. Maintenance costs a. 2 and 4 only
b. Purchase costs b. 1 and 3 only
c. Usage costs c. 3 and 4 only
d. Disposal costs
e. Decommissioning costs 38. Roger is responsible for capital equipment
purchases within a local hospital. To assist in
34. When developing a business case for a new developing a business case Roger would like to
product, a procurement department must consider calculate the payback period for the purchase of a high
a. terms and conditions of contract powered microscope. If the microscope costs £200,000
b. the supply market and will generate annual revenue of £50,000 when
c. the supplier positioning model would the payback period be?
d. Indirect costs a. 2 years
35. XTC LTD manufacture high specification steel b. 3 years
components for the telecommunications industry. It is c. 4 years
presently developing a new component which it d. 8 years
estimates will be ready for full production in around a 39. Buyer power may make a supply market more
year and will require the source of new materials to competitive. Which of the following are examples of
compete. buyer power?
It presently holds sufficient stock of existing materials Select two that apply
for the next three months, with a lead. time of two
months. It will need to purchase more stock. What a. Ability to easily switch suppliers
should XTC LTD do? b. Collusion between competitor suppliers
c. Suppliers are limited in number
a. Create a new specification for the existing d. High barriers of entry exists for new suppliers
supplier e. Consumer large in size relative to suppliers
b. Issue a purchase order to a new supplier
c. Create a new specification for a new supplier 40. John has been asked to develop a business case
d. Create a call off contract from the existing before obtaining approval to purchase a large piece of
supplier capital equipment for a glove manufacturing unit. Is
this the right thing to do?
36. John has used. a conformance specification for the
purchase of an aircraft parts. Was John correct to use a a. Yes because this will assist the purchase order
conformance specification? b. Yes because this will help compare alternatives
and options
a. Yes, because technical dimensions are necessary c. No because this consideration is not Responsibility
for health and safety reasons d. No because this can lead to business focus thinking
b. No because he wanted to include product
drawings. 41. A wide range of factors may be taken into account
c. Yes because he wanted a wide range of solutions by suppliers when setting or negotiating prices. Which
d. No because the part is restricted by law for health
and safety reasons
of the following are internal factors in pricing 4. The use of outsourced subcontracted and casual
decisions. Select two that apply labour

a. Strategic objectives of organisation Which of the below business sectors does JM Group
b. Competitor pricing belong to
c. Customer perception of value
a. a Agriculture
d. Environmental factors affecting raw materials
b. Engineering
e. Where the product is in it's life cycle
c. Manufacturing
42. Alexander has identified that he wishes to use d. Construction
performance based specification for the purchase of a
46. Which one of these business sectors is most
new HR staffing schedule system. Was this the correct
concerned with business objectives that include having
choice of action?
responsive production processes that can react quickly
a. No because technology is changing rapidly to market changes has an emphasis on brand names
b. Yes because a specific blueprint is necessary for that can support the sales function and can launch new
functional requirements products on sale quickly
c. Yes because suppliers have greater technical
a. Manufacturing
knowledge than the buying organisation
b. FMCG
d. No because there is clear objective criteria for
c. Services
evaluating alternative solutions.
d. Engineering
43. Head of procurement Harpal would like to build up
47. What criteria can be applied in the creation of a
an overall picture of the manufacturing operational
business case?
costs for the production of a textbook. Which of the
following are classified as indirect costs? Select two a. a costs and benefits
that apply b. Charges and fines
c. Delivery and storage
a. Utilities, electricity
d. Invoices and payments
b. Glue costs for books
c. Advertising costs 48. When considering procuring a product that they
d. Machine operator salary have never purchased previously, a company should
e. Royalties to Author consider
44. Which of the following are primary sources of a. a force majeure clause
market data for costs and prices. Select two that apply b. How many suppliers are available
c. Key performance indicators
a. Published economic indices
d. Indirect costs
b. Industry press
c. Supplier marketing communications 49. When inviting tenders for the procurement of
d. Price comparison website some capital equipment that will be expected to
e. Trade fairs operate for at least five years, what should the
procurement take into account when analysing the
45. JM Group has faced the below challenges in recent
whole life costs of the equipment.
decades
a. The supplier's balance sheet
1. A poor reputation for quality, delivery, cost control
b. Internal stakeholders
and health and safety
c. maintenance schedule
2. Pressure to reduce it's environmental impact d. Terms and conditions of contract
e. No because technology is changing rapidly
3. An adversarial supply chain climate and fragmented
supply chains
50. A company finished product has fifty component b. Substitute power
that have to be purchased. It wants to reduce costs c. Supplier bargaining power
and believe the number of components can be d. Buyer bargaining power
reduced to thirty by looking at each individual
54. Josh a junior procurement analyst was asked to
component or removing those that do not add
analyse the cost breakdown for some of the major
anything to the finished product.
category products that he purchases for the
What is this process called? engineering company he works for. He has looked at
various types of costs and has identified some
a. Value analysis
corrections. Which of the following do you believe are
b. Standardisation
correct?
c. value engineering
1. Direct product costs tend to be variable costs for the
d. Market testing
organization
51. A procurement department has asked for a pricing 2. Indirect product costs tend to be fixed costs for the
structure that will allow the supplier to cover their organization
costs plus £10000 to cover the supplier's profit. 3. Direct costs are also known as overheads for the
organisation
What is this arrangement called? 4. Indirect costs also known as the marginal costs for
a. Cost plus shared incentive the organisation
b. Cost plus a percentage fee a. 1 and 2 only
c. Cost plus an incentive b. 2 and 3 only
d. Cost plus a fixed fee c. 3 and 4 only
52. A company looking after public transport including d. 1 and 4 only
maintaining bus and train stations which are used 55. What are the typical uses of specifications in
extensively by the general public. What criteria should procurement and supply?
the procurement department take into account in the
specification for a cleaning contract that will have the Select two that apply
most impact on the people using the building?
a. Define the requirements
a. The style of uniform the staff should wear when b. Provide supplier appraisal and selection
cleaning c. Defining bargaining strength of the buyer
b. What reference a cleaning contractor should d. Provide a means of evaluating the quality of
provide with the quotation conformance
c. The frequency that the buildings will be cleaned e. Minimise bargaining strength of the supplier
d. Contracts penalty clauses for non performance of
56. When purchasing routine items such as common
the cleaning contract
stationary supplies, how can the business need for
53. Lucy, a junior procurement analyst has been asked functional efficiency be met?
to assess the competitive forces in the garden
1. Including incentives and penalties in contracts
furniture market.
2. Introducing e-procurement solutions
XYZ LTD is the largest producer of garden furniture in
the country. It produces 70% of all the furniture 3. Introducing competitive bidding
manufactured. Whilst the second largest manufacturer
4. Vendor management inventory
produces less than 5% of the garden furniture for the
country. a. 1 and 2 only
b. 2 and 3 only
Which power does XYZ LTD possess?

a. Purchasing power
 c. 2 and 4 only d. Notes
d. 3 and 4 only
62. Which one of these business sectors is most concerned
57. A company is considering buying a new computer with business objectives that include havingresponsive
system to handle large amounts of personal data and production processes that can react quickly to market
expects the system to perform in a particular way. changes has an emphasis on brand names that can
support the sales function and can launch new
Which of the following should be included in the
products on sale quickly
performance specification? Select two that apply
a. Manufacturing
a. Lists output
b. FMCG
b. List of input
c. Services
c. Technical drawings
d. Engineering
d. Brand name
e. System operating conditions

58. When estimating future costs, procurement , 63. Which of the following are typical examples of a tender
procurement needs to take account of a supplier's specification? Select TWO that apply
pricing strategy. If the supplier is skimming the market a. Requisition
their prices will be lower. Is this true or false? b. Conformance
a. False. a supplier will have lower prices when c. Performance
penetrating the market. d. Purchase order
e. Selection questionnaire
b. False, a supplier will have higher prices when
skimming the market 64. The bargaining strength of suppliers is likely to be high
c. True. a supplier has to sell more products at a low in which of the following situations?Select TWO that
price to stay in business apply
a. There is a limited number of suppliers in relation
d. True. a supplier will calculate and add on a low mark
to buyers
up for profit
b. The buyer is large in size relative to suppliers
59. What are the sources of information that can be c. The buyer spend is a high proportion of
used to pay for create specification? suppliers revenue
d. The buyer requirement is urgent
a. Sketches
e. The buyer is educated in supply markets
b. Details
c. Standards
65. Which of the following are criteria that the ISO 14000
d. Notes series covers
60. Which competitive forces influence markets in our 1. Life-cycle analysis
modern environment? 2. Continuous improvement
a. Manufacturing of goods and services 3. Financial information
b. Bargaining strength of suppliers and buyers 4. Climate change
c. Production companies and relationships a. 1 and 4 only
d. Increase cost in supply and deliveries b. 2 and 3 only
c. 3 and 4 only
61. What are the sources of information that can be
d. 1 and 2 only
used to create specification?

a. Sketches 66. Which ONE of the following factors would increase a

b. Details buyer’s bargaining power in anegotiation with a
c. Standards supplier?
a. There are a number of alternative suppliers the
buyer could use
 b. There is a high level of demand from other pricing mechanism to use when asking suppliers to
buyers for the supplier’s product quote prices?
c. The buyer’s specification is for a specific a. Fixed price
branded good b. Fixed price with adjustment for inflation
d. Pricing in the market is regulated by national c. Cost plus fixed fee
government
d. Cost plus percentage fee
67. Which of these are fixed cost? Select TWO that apply
72. Specifications will form the foundation of many
a. Staff over time
contracts and allow suppliers to receive clearinsight
b. Premises costs
into the project expectations. A local authority needs
c. Utilities costs
to create a hard surface bridge,which is 2 meters wide
d. Materials costs
to go over a local river. It needs a warranty of
e. Sales commission
workmanship and materials. Which specification would
be the most appropriate?
68. When considering procuring a product that is a
a. Output specification
modified re-buy, a company should consider
b. Input specification
a. Key performance indicators
c. Outcome specification
b. The make or buy option
d. Combination specification
c. The supply market
d. Terms and conditions of the contract
73. Which of the following content should a performance
69. An auto motive firm has just launched their first specification feature? Select TWO thatapply.
innovative self-driving vehicle. They havechosen a a. Exact details of the packaging
market skimming pricing strategy. Is this the right b. Outcomes to be achieved
decision? c. Drawings of the required product
a. Yes, because this enables them to recoup d. Required quality level
some of the costs of research e. Approved / excluded materials requirements
b. Yes, because this will give them a more
attractive price in the market place 74. A project manager is reviewing a make or buy
c. No. because this strategy ignores the impact of analysis as part of a procurement strategy.Which
competition type of costs should the project manager consider for
d. No, because this is not tailored to different the analysis?
market segments 1. Direct costs
2. Indirect costs
70. Head of procurement Maria would like to build up an 3. Out-of-pocket costs
overall picture of the manufacturing operational costs 4. VAT costs
for the production of a text book. Which of the a. 1 and 3 only
following are classified as direct costs? b. 1 and 2 only
a. Ink costs for the book c. 3 and 4 only
b. Royalties to author d. 2 and 4 only
c. Oil costs to lubricate print press
d. Salary for sales staff 75. The buyer’s database is regarded as a primary data
e. Building insurance costs source. Which of the following is also asource of
primary data?
71. A company has installed a new piece of capital a. Price lists collected from suppliers’
equipment but needs to arrange a maintenance representatives at trade fairs
contract for three years. The company wants to know b. Price listings on comparison websites and market
as accurately as possiblewhat this price will be for the exchanges
full contract. What would be an appropriate type of c. Published economic indices such as the retail
 price index costs.
d. Financial and trade press including journals
published by professional bodies 80. Suppliers are powerful in which of the following
situations?
76. A company has purchased a component, but it has 1. There is potential for
failed inspection. It has been purchased regularly for backward integration
use in a finished product but the company decided to 2. Products and services are
use a new supplier and issued a very short undifferentiated
performance specification to the supplier. What could 3. The switching costs for
be the reason for the failure? buyers is high
a. Underspecified 4. There are few substitute
b. Value analysis products
c. Standardization
a. 1 and 4 only
d. Wrong lists of inputs
b. 3 and 4 only
c. 1 and 2 only
77. Which of the following are secondary sources of data
d. 1 and 3 only
for costs and prices?
1. Industry press
81. A company looks after public transport including
2. Published economic
maintaining bus and train stations which areused
indices
extensively by the general public. What criteria should
3. Trade fairs
the procurement department take into account in the
4. Buyer’s database on
specification for a cleaning contract that will have most
market data
impact on the people using building?
a. 1 and 2 only a. The style of uniform the staff should wear when
b. 2 and 3 only cleaning
c. 1 and 4 only b. Which references a cleaning contractor should
with quotation
d. 2 and 4 only
c. How often will the buildings will be cleaned
78. When drafting a business case, Benjamin believes he d. Contract penalty clauses for non-performance of
has power over a supplier and will consider this when the cleaning contract
detailing budget information. Is adopting a powerful
82. Roger is responsible for capital equipment purchases
approach with the supplier a reasonable approach?
within a local hospital. To assist in developing a
a. Yes, as long as there are other supply options
business case, Roger would like to calculate the pay-
b. Yes particularly for highly critical items
back period for thepurchase of a high powered
c. No, collaborative approaches should always be microscope. If the high demand microscope costs $200
adopted
000 andwill generate annual revenue of $50 000, how
d. No, power should never be used by a buyer on
long would the payback be?
suppliers
a. 2 years
79. Azram a procurement analyst has been tasked with b. 3 years
analyzing whole life costing whenpurchasing a piece c. 4 years
of laboratory equipment. Was this the correct course d. 8 years
of action?
83. XYZ Ltd operates in the plumbing and heating industry.
a. Yes, as this focuses on the price of the
The company has developed and patented a new
equipment being purchased
range of alternative products using a different material
b. Yes, because considers operational costs
from a conventionalbrass that offers substantial cost
c. No, because this considers the costs of quality
savings. XYZ Ltd plans to launch the full range of new
d. No because this covers various transactional
 products. Will this change the impact of competitive garden furniture manufactured, while the second
forces in the market? largest manufacturer produces less than 5% of the
a. Yes, this development has created substitute garden furniture for the country. Which power does
products XYZ Ltd possess?
b. Yes, this development created the threat of new a. Purchasing power
entrants b. Substitute power
c. No, this development does not impact on c. Supplier bargaining power
supplier bargaining power d. Buyer bargaining power
d. No, this development does not impact on buyer
bargaining power. 88. Which of the following would be an indirect cost of
motor vehicle manufacturer?
84. XYZ Ltd is the largest consumer for brass in the
a. Steel components
country. It consumes 48% of all brass manufactured
b. Manufacturing employees’ wages
while the second largest consumes less than 10% of
c. Machine tooling
brass manufactured. Which force of power does XYZ
d. Director’s salary
Ltd possess?
e.
a. Market rivalry force 89. An example of direct cost is ….
b. Threat of substitute force a. An overhead expense
c. Supplier bargaining power b. Rent for premises
d. Buyer bargaining power c. Office cleaning
d. Raw materials

85. Which competitive forces influence markets in our 90. When a stakeholder drafts a specification, the buyer
modern environment? should provide input to ensure that it …
a. Manufacturing of goods and services a. Is grammatically correct and there are no spelling
b. Bargaining strength of suppliers and buyers or formatting errors
c. Production companies and relationships b. Contains few details to allow as wide a market as
d. Increased cost in supply and deliveries possible to respond
c. Tells the supplier precisely how to deliver the
86. Aircraft Category Manager, Harpal Patel is purchasing contract in all aspects
several aircraft engines. He is seeking to determine d. Contains what is needed and will lead to the most
which category of specification will be most effective solution
appropriate, he decides on using aconformance
based specification. A conformance based 91. Which of the following does the ISO 9000 series cover?
specification is most appropriate in which of the Select TWO that apply.
following instances? a. Life-cycle analysis
a. When technical dimensions are necessary for b. Financial information
operational reasons c. Achieving objectives
b. When technology is changing rapidly in the d. Continuous improvement
market sector e. Process approach
c. Where suppliers have greater relevant technical
expertise than the buyer 92. Would economies of scale be a barrier to entry for
d. Where there are clear objective criteria for potential new entrants to a market
evaluating solutions put forward by suppliers a. Yes, it allows established competitors to squeeze
new entrants with a price war
87. Lucy a junior procurement analyst has been asked to b. No, it makes the buyer more powerful, they can
assess the competitive forces in the garden furniture force down prices in a war
market. XYZ Ltd is the largest producer of garden c. No, the volume purchased by the buyer or
furniture in the country. Itproduces 70% of all the industry is not important to the market
 d. Yes, it is an aggressive competitive strategy, one a. 1 and 2 only
firm’s gain is another firm’s loss b. 1 and 3 only
c. 3 and 4 only
93. An example of a performance specification is a d. 2 and 4 only
a. Brand name
b. List of outputs 98. When making a business case the proposal has to
c. List of inputs consider financial costs, non-financial costsand
d. Technical drawing opportunity costs. What is an opportunity cost?
a. Opportunistic expenditure incurred in speculative
94. A buyer has a stronger negotiating position when the activities such as auctions
market place has … b. Opportunity foregone by choosing to spend on
a. Supplier monopolies one option instead of the other
b. Limited substitutes c. The cost of lost opportunities because of
c. Supplier saturation operational disruption or reputational damage
d. Limited competition d. The expenditure incurred by investing in costly
and opportunistic ventures such as mergers
95. A plastics firm is creating a specification that needs to
99. Alex has identified that he wishes to use a
specify the exact type of chemical makeup required.
performance based specification for the purchaseof
This would include a given set of tolerances for the
new HR staffing scheduling system. Was this the
chemicals to be used inthe manufacturing process of a
correct course of action?
new product. Which one of the following specifications
shouldthey use? a. No, because technology is changing rapidly
a. Outcome b. Yes, because specific blueprint is necessary for
functional requirements
b. Technical
c. Yes, because suppliers have greater technical
c. Brand name
knowledge than the buying organization
d. Performance
d. No, because there are clear objective criteria for
evaluating alternative solutions
96. Which of the following are cash outflows found in the
cash budget? 100. Head of procurement Harpal would like to build up
1. Overdraft facilities an overall picture of the manufacturing costs of a text
2. Staff salaries book. Which of the following are classified as indirect
3. Customer payments costs? Select TWO thatapply.
4. VAT or sales tax a. Utilities , electricity
a. 1 and 2 only b. Glue costs for books
b. 2 and 3 only c. Advertising costs
c. 2 and 4 only d. Machine operator salary
d. 1 and 4 only e. Royalties to author

97. Which of the following is an accurate definition of 101. As the lead procurement manager you have been
budgetary control? asked to compile a business case for a largeproject.
1. An estimation of what Which of the following should you include in the
costs are likely to be business case?
2. A comparison of estimates 1. Costs and risks
with actual cost
2. List of large suppliers
3. Securing fixed prices within
3. Business benefits
the budget
4. Informal recommendation
4. Ensuring all of budget
available is used a. 1 and 3 only
b. 2 and 4 only
 c. 1 and 4 only number of suppliers in a particular market?
d. 2 and 3 only a. Introduction of minimum wage regulations
b. High and increasing levels of investment required
102. A company is building a new two storey office to enter the market
block and will need to purchase new desks andchairs. c. Requirement for all companies to have 10 000 or
There will be no much space available. What should more employees
be included in the specification for these desks and d. De-regulation of previously government run
chairs? industry
a. Technical drawings
107. Is ISO 14 000 a series of environmental standards?
b. A brand name
a. No, it’s a series of quality standards including
c. A list of inputs
continuous improvement
d. Key performance indicators
b. Yes, it’s a series of environmental standards
including life cycle analysis
103. The main benefit of using standards in a
c. Yes, it’s a series of information security standards
specification is…
including financial information
a. The British standards are aligned with other
d. No, it’s a series of risk management by standards
international standards
including achieving objectives
b. The standards provide a clear guide with no
ambiguity and uncertainty 108. Buyers can ascertain the prices by examining
c. That standards allow the supplier to give the information provided by primary and secondarysources
buyer a bespoke product
of market data. Which of the following is a secondary
d. It will ensure the latest technology standards
source of market data?
are kept up to date
a. Supplier prices provided on price comparison
104. A company’s finished product has 50 materials websites
that have to be purchased. It wants to reducecosts b. Historical records of supplier prices on the
buyer’s database
and believes the number of materials can be reduced
c. Price brochures provided by the supplier’s sales
to 30 by looking at each individual
team
material and removing those that do not add
d. Suppliers prices provided on the buyer’s request
anything to the finished product. What is this for quotation
process called?
a. Value analysis 109. Which of the following costs can be classified as
b. Standardization direct costs?
c. Value engineering a. Cost of drilling machines to be used by the
d. Market testing technicians on a car assembly line
b. Cost of the safety boots worn by the company
105. The volume purchased by the buyer or industry workforce
is important to a supplier in a competitivemarket. Is c. Salary of the production manager in charge of
this statement TRUE or FALSE? both day and night shifts
d. Wages of technician responsible for installing
a. True, it is an aggressive strategy , one firm’s gain
engines into cars on an assembly line
is another firm’s loss
b. True, it makes the buyer more powerful as they
can force down prices 110. Samantha has recently joined Spann Farm Foods
c. False, the volume purchased by the buyer or (SFF) as a procurement manager. She has instructed
industry is not important her team to develop and distribute a standard
d. False, it allows potential new entrants to enter specification template for businessstakeholders to use
the competitive market when requesting purchases. How would this benefit
SFF?
106. Which of the following events would increase the a. Use of a standard template would prevent
 fraudulent purchases being made by 113. An engineering company that manufactures
stakeholders hydraulic tipping gear for fitting to vehicles is
b. Use of a standard template would allow buyers redesigning the range of lifting equipment that it
to quickly identify any missing information supplies to its customers. The mostexpensive
c. Use of a standard template would reduce the components are steel tubes for which the company is
amount of negotiation required on the terms writing a conformance specification which will allow
and conditions of the contract. procurement to invite tenders from potential suppliers
d. Use of a standard template would mean these tubes have been purchased from one supplier for
suppliers will be more willing to negotiate on the last three years. Which of the following
thecost of the product specifications should be included so that procurement
can follow a successful tendering procedure? Select
111. Gaskin Gaskets (GG) is a manufacturing company TWO that apply.
that wants to identify new suppliers for a number of a. Concise terms and conditions of contract of the
current parts. GG no longer has technical drawings steel tubes
for the parts and none of the engineers currently b. The price the company expects to pay for the
working for them has enough knowledge of the parts steel tubes
to write a specification. c. Technical drawings of the required tubes for the
steel tubes
What could GG do to get accurate pricing for these d. The current supplier’s technical standards for the
parts to compare to the existing parts? steel tubes
e. The steel tubes working conditions for the steel
a. GG’s engineers could estimate the
tubes
specification and drawings that are sent to
prospectivesuppliers 114. Josh a junior procurement analyst was asked to
b. GG could send samples of the parts to analyse the cost breakdowns for some of themajor
prospective suppliers as part of the request for category products that he purchases for the
quotation engineering company he work for. He haslooked at
c. GG could communicate a cost to the various types of costs and has identified some
suppliers that must be met regardless of the correlations. Which of the followingare correct?
finalspecification
d. GG could allow suppliers to develop and use 1. Direct product costs tend to
their own specification as part of their cost be variable costs for the
proposal organization
2. Indirect product costs tend
112. How can procurement support the finance to be fixed costs for the
department in developing an accurate forecast fora organization
project budget? 3. Direct costs are also known
as overheads for the
a. Procurement can interpret the business
organization
technical requirements for finance colleagues
b. Procurement can provide additional resource
4. Indirect costs are also known
as the marginal costs for the
to work in the finance department during
organization
budget setting periods
c. Procurement and finance can work together a. 1 and 2 only
to amend supplier specifications in order to b. 2 and 3 only
reduce budgeted costs c. 2 and 4 only
d. Procurement can provide benchmark costs and d. 1 and 4 only
identifying potential savings opportunities
ahead of the start of the project
115. A company wishes to write a business case to estimates will be ready for fullproduction in around a
justify the purchase of an expensive piece of year. XTC holds sufficient stock of existing materials for
equipment that will be expected to be in use for at the next threemonths, with a lead time of two months
least five years. The equipment will cost it will need to purchase more stock. What should XTC
$100 000 but bring in $20 000 of income a year. Ltd do to ensure continuity of supply for production?
The production manager wants to recommend a. Create a new specification for the existing
the equipment because its payback period exactly supplier
matches the minimum life. Is this the right reason b. Issue a purchase order to a new supplier
for justifying the expenditure? c. Create a new specification for a new supplier
a. Yes, payback is the only method to evaluate d. Create a call off contract from the existing
capital purchases supplier
b. Yes, the only consideration is that the
equipment will pay for itself 120. Which of the following will help the bargaining
c. No, the company should consider only the strength of a buyer?
equipment affordability 1. The buyer has the option to
d. No, this method makes no allowance for the make the product inhouse
future value of money. 2. There are a limited number
of suppliers available to the
116. If an item is regarded as being of low financial buyer
value and represents a low level risk to the 3. The buyer’s switching costs
organization it would be handled as a…. are high
a. Leverage item 4. The buyer’s spend is a high
proportion of the supplier’s
b. Non critical item
revenue
c. Strategic item
a. 1 and 2 only
d. Bottleneck item
b. 2 and 4 only
117. Which of the following would be considered to be c. 1 and 4 only
direct costs? Select TWO that apply d. 2 and 3 only
a. Production materials
b. Head office salaries 121. The main purpose of benchmarking is . Ch
c. Company car depreciation a. To discover the best prices and services available
d. Manufacturing staff wages b. To force a supplier to reduce their prices
e. Buildings insurance c. To disclose another suppliers information
d. To know what price suppliers has to beat
118. A large sports organization requires some
122. Rita was proud of the business plan that she
additional racing equipment to be built. It should
had created in preparation for a meeting with her
match exactly the predetermined technical
procurement director. In the plan she had created a
specifications and requires exact compatibility. Which
budget based on last year’s usage with the sales
of the following specifications would be most
departments predicted annual increases. What type of
appropriate?
a budget has Rita created?
a. Conformance specification
b. Performance specification • Zero based
c. Outcome specification • Incremental budget
d. Product specification
• Activity based budget
119. XTC Ltd manufactures high specification steel
• Rolling Budget
components for the telecommunications industry. It
is presently developing a new component which it