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1. When performing an outsourcing cost analysis, it is critical that both direct

and indirect costs be considered.
a. True
b. False

2. Purchasers attempting to reduce purchased quantity variability would benefit

by using multiple suppliers.
a. True
b. False

3. The primary objective of effective supplier performance is to track price

a. True
b. False

4. An essential objective of purchasing is to always buy at the lowest price.

a. True
b. False

5. The best use of buyers time is sourcing, negotiating, value analysis, and
a. True
b. False

6. A purchasing department would pursue a matrix-type organization to meet the

needs of a single or multiple projects.
a. True
b. False

7. If an enterprise offers a wide range of products, but strictly segregates them

by geographical region, a centralized approach to purchasing would be more
a. True
b. False

8. A certified supplier normally engages with the buyer in joint research and
a. True
b. False

9. A key role of a purchasing planner is to purchase products competitively.

a. True
b. False

10. Strategically sourced items are subject to wide market fluctuations and
changes in customer and competitor trends and pricing.
a. True
b. False


11. Which of the following is the next step in the purchasing cycle after a
requisition is generated?
a. Follow up
b. Approve payment
c. Issue purchase order
d. Receive goods

12. Which of the following is the most important responsibility of a purchasing

a. Getting the best price
b. Getting the best quality
c. Selecting the best source
d. Ensuring goods are delivered on time

13. Which of the following is a function of supplier scheduling and follow-up?

a. Selecting suppliers
b. Establishing specifications
c. Releasing orders
d. Price determination

14. Which of the following statements about purchasing is true?

a. In contract buying, price and delivery are negotiated each time an order is
b. Contract buying assures suppliers that they have a given amount of
business and commits them to allocating that amount of their capacity to
the customer
c. Contract buying is useful for short-term purchases
d. EDI does not eliminate much of the paper work associated with buying

15. The use of supply chain partners to provide products or services is called:
a. Outsourcing
b. Insourcing
c. Offshoring
d. Partnering
16. A key advantage provided by outsourcing is that it:
a. Increases company control over internal processes
b. Increases the companys access to state-of-the-art products and processes
c. Protects the companys proprietary designs and processes
d. Encourages the development of the companys core competencies

17. Which of these costs would be directly incurred by a firm engaged in

a. Direct material
b. Direct labor


c. Variable overhead
d. Price from invoice

18. Engaging in competitive bidding, active sourcing, and using industry

standards are all actions that are appropriate if the sourcing strategy is to:
a. Form partnerships with suppliers
b. Leverage marketplace advantage
c. Simplify the acquisition process
d. Ensure supply continuity

19. The following are all functional responsibilities of the buyer EXCEPT
a. Sourcing
b. Following up on supply deliveries
c. Negotiating prices
d. Coordinating supplier evaluation

20. Buyers can assure the timely supply of quality goods and services through
a. Managing inventory investment
b. Timely purchase order release
c. Alternate sourcing
d. Communicating accurate schedules to suppliers

21. An advantage gained by outsourcing a good or service is that it:

a. Gives the company a high degree of control over its operations.
b. Increases the companys access to state-of-the-art products and processes.
c. Protects the companys proprietary designs and processes.
d. Encourages the development of the companys core competencies.

22.Tactical buying is used for which type of materials?

a. Strategic
b. High value
c. Customized
d. Highly standardized

23. Which of the following statements best applies to make-or-buy decisions?

a. Only short-term costs need to be considered
b. Make-or-buy decisions need to be re-evaluated periodically
c. Workforce stability should not factor into the decision
d. Level of current capacity is a minor issue

24. Which purchasing method assumes the lowest level of operational integration
between supplier and customer?
a. Blanket order releases
b. Purchase order
c. Lean/JIT purchasing
d. Consignment inventory


25. The goal of a supplier evaluation system is to:

a. Ensure suppliers are meeting the needs of the buyer
b. Provide a basis for cost reductions
c. Emphasize price-oriented measures
d. Focus on on-time delivery

26. Which of the following is true of a supplier rating system?

a. It should be based on subjective, but measureable data
b. It should permit the use of objective measurable data
c. It works against a program of continuous improvement
d. It breaks down the trust between buyer and seller

27. Hedging is used to

a Protect against currency fluctuations
a. Compensate for counter trade
b. Back up a letter of credit
c. Address contingencies in a contract

28. The most desirable attribute in suppliers of companies that adopt JIT
production is
a. On-time delivery
b. Quantity received to quantity ordered
c. Consistent quality
d. Competitive pricing

29. In this purchasing method, the buyer commits to purchase a fixed percentage
of the companys inventory requirements in exchange for quality, price,
availability, and delivery considerations.
a. Requirements contract
b. Blanket purchase order
c. Discrete purchase order
d. Direct-ship purchase order

30. Which of the following activities is part of purchasing organizational

performance measurement?
a. Product quality
b. Cost reduction and cost containment
c. Flexibility
d. Price


Answer Key
1. T
2. F
3. F
4. F
5. T
6. T
7. T
8. T
9. F
10. T
11. c
12. c
13. c
14. b
15. a
16. b
17. d
18. b
19. b
20. c
21. b
22. d
23. b
24. b
25. a
26. b
27. a
28. c
29. a
30. b