Question 1

What issue is a buyer most likely to experience if the technical specification sent to suppliers as part of a Request For Quotation (RFQ) is insufficient?

Options :

A :

The buyer will receive quotes at different times from suppliers, which will require greater coordination with other members of the sourcing team

B :

The buyer will receive costs from suppliers in different formats, which will make it difficult to compare costs on a like-for-like basis

C :

The buyer will not be able to compare different suppliers' costs directly as the suppliers will have had to make assumptions on the specification

D :

The buyer will need to work with their finance colleagues and business stakeholders to adjust the budget available for the project

Answer: C

Question 2

Buyers in the same industry with the same understanding of relative value and price may still make different decisions about whether to switch. Which of the following factors may prompt a buying organization to incline toward substitute products?

1. There is potential for backward integration

2. Access to financial resources

3. The switching cost is high

4. The substitute fits organisation's strategy

Options :

A : 1 and 4 only

B : 3 and 4 only

C : 1 and 2 only

D : 2 and 4 only

E :

Answer: D

Question 3

Company A sells a product for $100. The total variable costs are $60. Fixed costs as in its account are $20,000. How many products does the company have to sell to achieve break-even point?

Options :

A : 550

B : 500

C : 400

D : 600

Answer: B

Question 4

Andrew is responsible for procurement of capital assets at Lumber Ltd. He is devising new business case for the purchase of a new band saw. The purchase price of the saw is $50,000. Andrew estimates that the machine will generate $10,000 per year of net cash flow. What is the payback period of this band saw?

Options :

A : 3 years

B : 5 years

C : 4 years

D : 10 years

Answer: B

Question 5

British Steel needs to source a set of instruments that will improve quality of steel. Without these instrument British Steel will loss control of the temperature the bucket freezes up, or if it is too hot it leaks out of the casting process, damaging the machine. There is limited supply on the market and quality varies greatly. Which of the following will be the most appropriate managing approach to procure these items?

Options :

A : Seek continuity of supply

B : Form partnership with supplier

C : Leverage market competition to drive down cost

D : Bundle these instruments into larger contract

Answer: B

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