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Rita was proud of the business plan that she had created in preparation for a meeting with her procurement director. In the plan she had created a budget based on last year’s usage with the sales departments predicted annual increases. What type of a budget has Rita created?
A company wishes to write a business case to justify the purchase of an expensive piece of equipment that will be expected to be in use for at least five years. The equipment will cost $ 100,000 but bring in $ 20,000 of income a year. The production manager wants to recommend the equipment because its payback period exactly matches the minimum life. Is this the right reason for justifying the expenditure?
If an item is regarded as being of low financial value and represents a low level risk to the organization it would be handled as a…
A company’s finished product has 50 materials that have to be purchased. It wants to reduce costs and believes the number of materials can be reduced to 30 by looking at each individual material and removing those that do not add anything to the finished product. What is this process called?
The volume purchased by the buyer or industry is important to a supplier in a competitive market. Is this statement TRUE or FALSE?
Which of the following events would increase the number of suppliers in a particular market?
Is ISO 14 000 a series of environmental standards?
Which of the following would be considered to be direct costs? Select TWO that apply
A large sports organization requires some additional racing equipment to be built. It should match exactly the predetermined technical specifications and require exact compatibility. Which of the following specifications would be most appropriate?
XTC Ltd manufactures high-specification steel components for the telecommunications industry. It is presently developing a new component which it estimates will be ready for full production in around a year. XTC holds sufficient stock of existing materials for the next three months, with a lead time of two months it will need to purchase more stock. What should XTC Ltd do to ensure continuity of supply for production?
Which of the following will help the bargaining strength of a buyer?
1. The buyer has the option to make the product inhouse
2. There are a limited number of suppliers available to the buyer
3. The buyer’s switching costs are high
4. The buyer’s spend is a high proportion of the supplier’s revenue
How can procurement support the finance department in developing an accurate forecast for a project budget?
An engineering company that manufactures hydraulic tipping gear for fitting to vehicles is redesigning the range of lifting equipment that it supplies to its customers. The most expensive components are steel tubes for which the company is writing a conformance specification which will allow procurement to invite tenders from potential suppliers these tubes have been purchased from one supplier for the last three years. Which of the following specifications should be included so that procurement can follow a successful tendering procedure? Select TWO that apply
Josh a junior procurement analyst was asked to analyse the cost breakdowns for some of the major category products that he purchases for the engineering company he works for. He has looked at various types of costs and has identified some correlations. Which of the following are correct?
1. Direct product costs tend to be variable costs for the organization
2. Indirect product costs tend to be fixed costs for the organization
3. Direct costs are also known as overheads for the organization
4. Indirect costs are also known as the marginal costs for the organization
Buyers can ascertain the prices by examining information provided by primary and secondary sources of market data. Which of the following is a secondary source of market data?
Which of the following costs can be classified as direct costs?
Samantha has recently joined Spann Farm Foods (SFF) as a procurement manager. She has instructed her team to develop and distribute a standard specification template for business stakeholders to use when requesting purchases. How would this benefit SFF?
Gaskin Gaskets (GG) is a manufacturing company that wants to identify new suppliers for a number of current parts. GG no longer has technical drawings for the parts and none of the engineers currently working for them has enough knowledge of the parts to write a specification. What could GG do to get accurate pricing for these parts to compare to the existing parts?
When making a business case the proposal has to consider financial costs, non-financial costs and opportunity costs. What is an opportunity cost?
Alex has identified that he wishes to use a performance based specification for the purchase of new HR staffing scheduling system. Was this the correct course of action?
Head of procurement Harpal would like to build up an overall picture of the manufacturing costs of a text book. Which of the following are classified as indirect costs? Select TWO that apply.
As the lead procurement manager, you have been asked to compile a business case for a large project. Which of the following should you include in the business case?
1. Costs and risks
2. List of large suppliers
3. Business benefits
4. Informal recommendation
A company is building a new two-storey office block and will need to purchase new desks and chairs. There will be no much space available. What should be included in the specifications for these desks and chairs?
The main benefit of using standards in a specification is…
A plastics firm is creating a specification that needs to specify the exact type of chemical makeup required. This would include a given set of tolerances for the chemicals to be used in the manufacturing process of a new product. Which one of the following specifications should they use?
Which of the following are cash outflows found in the cash budget?
1. Overdraft facilities
2. Staff salaries
3. Customer payments
4. VAT or sales tax
Which of the following is an accurate definition of budgetary control?
1. An estimation of what costs are likely to be
2. A comparison of estimates with actual cost
3. Securing fixed prices within the budget
4. Ensuring all of budget available is used
A procurement department has asked for a pricing structure that will allow the supplier to cover their costs plus $10 000 to cover the supplier’s profit. What is this arrangement called?
An example of a performance specification is a …
A buyer has a stronger negotiating position when the market place has …
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