chap02.doc

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Department
Supply Chain Management
Course
33:799:301
Professor
spiegel
Semester
Fall

Description
Chapter 2—Purchasing and Supply Management TRUE/FALSE 1. In the context of Supply Chain Management, the acts of obtaining raw materials, services, maintenance, repair and operating supplies for money can all be defined as purchasing. ANS: T PTS: 1 2. In the context of Supply Chain Management, the acts of obtaining raw materials, services, maintenance, repair and operating supplies for money can all be defined as integration. ANS: F PTS: 1 3. Industrial supply chain member buyers purchase their merchandise in volume to take advantage of quantity discounts, transportation economy, and storage efficiency, and then they create value through services like consolidating merchandise or break bulking. ANS: F PTS: 1 4. Merchant supply chain member buyers purchase their merchandise in volume to take advantage of quantity discounts, transportation economy, and storage efficiency, and then they create value through services like consolidating merchandise or break bulking. ANS: T PTS: 1 5. The goal of a good purchasing system is to ensure efficient information transitions between the materials users, the purchasing personnel, and the suppliers. ANS: T PTS: 1 6. NAFTA and the WTO are trade organizations seeking to reduce tariff and non-tariff barriers among its member countries. ANS: T PTS: 1 7. The WTO is a trade organization seeking to establish trade barriers that will protect member countries by excluding nations that pose an economic threat. ANS: F PTS: 1 8. Blank check purchase orders, Corporate purchasing cards, Petty cash, and Open-end purchase orders are all possible alternatives to dealing with small value purchases such as those for office supplies. ANS: T PTS: 1 9. If the break-even point in a typical make-buy scenario is 24,000 units and 8,000 units are required, than the firm should choose to make. ANS: F PTS: 1 10. If the break-even point in a typical make-buy scenario is 10,000 units and 15,000 units are required, than the firm should choose to make. ANS: T PTS: 1 11. Centralized purchasing is the practice where individual, local purchasing departments throughout a single corporation make their own, individual purchasing decisions to fulfill their individual local needs. ANS: F PTS: 1 12. Decentralized purchasing is the practice where individual, local purchasing departments throughout a single corporation make their own, individual purchasing decisions to fulfill their individual local needs. ANS: T PTS: 1 13. Examples of tariffs include quotas, licensing agreements, and embargoes. ANS: F PTS: 1 14. Examples of nontariffs include quotas, licensing agreements, and embargoes imposed on import and exports. ANS: F PTS: 1 15. The possibility of events like strikes, assembly line breakdowns, and natural disasters are all reasons a company should favor using a single supplier. ANS: F PTS: 1 16. According to the Annual Survey of Manufacturers, the cost of materials exceeds the value added to the materials during manufacturing. ANS: T PTS: 1 17. The United States' Federal Acquisition Streamlining Act (FASA) allows government purchases that are less than $250,000 to occur through a simplified procedure that includes full and open competitive bidding. ANS: F PTS: 1 18. While Inventory turnovers can be calculated a number of different ways, a common way to calculate inventory turnovers is by dividing the cost of goods sold by the average inventory at cost. ANS: T PTS: 1 MULTIPLE CHOICE 1. Which type of requisition is used for materials and standard parts that are requested on a recurring basis? a. Open requisition b. Blanket requisition c. Traveling requisition d. Recyclable requisition (Cyc-Rec) ANS: C PTS: 1 2. On occasion, firms assist suppliers, new or old, to improve their processing capabilities, product or service quality, delivery effectiveness, and cost performance by providing the required technical and financial assistance. This is referred to as: a. Supplier development b. Outsourcing c. Centralized purchasing d. Supplier hybridization ANS: A PTS: 1 3. Which of the following documents is considered the buyer's offer to purchase products or services from a supplier, is legally binding once the supplier accepts it, and usually has the terms and conditions of purchase preprinted on the back of the document? a. Purchase requisition b. Planned order release c. Material requisition d. Purchase order ANS: D PTS: 1 4. Benefits derived from implementing e-procurement systems include all of the following EXCEPT: a. Allows buyers to submit bids and suppliers to respond to those bids in real time b. Increases the accuracy in communication between buyers and suppliers c. Creates numerous additional job opportunities in the purchasing department d. Tracking bids and transactions is easier and faster ANS: C PTS: 1 5. Which of the following illustrates Forward Integration? a. Microsoft starting a new division that designs and manufactures clothing b. Ford automotive buying additional machines for production c. Subway sandwich company buying a bakery to make the bread for their sandwiches. d. Sony buying trucks to deliver their finished goods inventories to their customers' warehouses ANS: D PTS: 1 6. Which of the following would be a good reason to outsource (buy) versus making? a. A firm lacks the technology or expertise to produce an item b. To utilize existing capacity within a company's own firm c. To have more direct control over the deign and production of an end item d. No competent supplier presently produces the needed item ANS: A PTS: 1 7. Which of the following statements is FALSE? a. More than 50% of each sales dollar typically goes towards covering supply chain costs b. Decentralized purchasing means not having any purchasing departments and allowing all employees to act as purchasing agents c. Electronic procurement systems can aid a company in saving both time and money d. If a firm lacks the technology to make a required component they will need to consider buying/outsourcing. ANS: B PTS: 1 8. Which of the following is a reason that single sourcing is considered risky/bad? a. The buyer's required ordering quantities are very low b. Larger orders make quantity discounts more likely c. The limited (finite) capacity of one supplier d. Decreases the item to item quality variability of items purchased ANS: C PTS: 1 9. Which of the following is NOT a form of countertrade? a. Barter b. Offset c. Incoterming d. Counterpurchase ANS: C PTS: 1 10. Given the following make-buy information, what would be the break-even point? Make Option Buy Option Fixed Costs $15000 $1250 Variable Costs $ 5 $ 10 a. 917 units b. 2875 units c. 1083 units d. 2750 units ANS: D PTS: 1 11. According to the textbook, the Las Vegas division of Harrah's Entertainment utilizes which of the following purchasing structures? a. Autocratic b. Decentralized c. Centralized d. Hybrid (centralized-decentralized) ANS: D PTS: 1 12. If a distribution company that focused on warehousing and distribution of grocery items decided to purchase a chain of grocery stores, the distribution company would be exemplifying: a. Backward vertical integration b. Forward vertical integration c. Backward horizontal integration d. Forward horizontal integration ANS: B PTS: 1 13. As firms seek to improve the products they offer to the market, companies are seeking help from their suppliers in new product design and development through: a. Supplier certification programs b. Manufacturer certification programs c. Early supplier involvement d. Total Cost of Ownership initiatives ANS: C PTS: 1 14. Given the following make-buy information, what would be the break-even point? Make Option Buy Option Fixed Costs $7500 $1500 Variable Costs
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