ZAMBIA INSTITUTE OF BUSINESS STUDIES AND

INDUSTRIAL PRACTICE
(ZIBSIP)

CIPS –Certificate

NC1: Procurement and Supply Principles

Test 1

Date: 20th September, 2013Duration: 1 hour

Start: 14:00hrs Stop: 15:00hrs

Instructions

a) All the questions in this paper are compulsory.

b) The paper contains 20 multiple choice questions, choose the correct answer and
indicate on your answer sheet accordingly.
c) All questions carry equal marks.

Total Marks: 100

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

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Q1. Which of the following is a definition of ‘the supply chain’?

(a) The way in which information passes from user to procurement to supplier
(b) The range of suppliers used by a purchasing organisation
(c) The types, frequency and organisation of deliveries to the end user
(d) The network of organisations and activities involved with the flow and
transformation of goods.

Q2.Which of the following tasks are required in the ‘pre-award phase’ of the purchasing cycle?

(a) Identification of needs and producing specifications if required.

(b) Expediting, reviewing progress and processes
(c) Reviewing quotations, gaining authorisation and placing orders
(d) Assessing supplier performance and checking invoice details if required.

Q3. why is it that an organisation can be viewed as an open system?

(a) It works in isolation without interacting with the environment.

(b) It takes in inputs from the environment and processes them in some way to create
outputs to the environment.
(c) It takes in inputs from the environment, processes them and releases nothing to the
environment.
(d) It only uses its in-house resources to create outputs.

Q4. which of the following is described as ‘all organisations and activities associated with the
transformation of goods from the raw materials stage, through to the end user as well as
associated information flows’.

(a) Focal firm

(b) Upstream activities
(c) Supply chain
(d) Downstream activities.

Q5. Which of the following accounts for over 50% of expenditure of an organisation’s income?
(a) Wages
(b) Other Internal costs
(c) Overheads
(d) Materials bought out.

The information below is for a manufacturing organisation. Analyse and answer questions 6
and 7.

Suppose that annual sales are $50m, with materials costs equal to 60% of sales and ‘internal’
costs of $15. Profit is therefore $5m

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Q6. What will be the new material costs figure if it reduces by 5%?

(a) $50 000 000

(b) $30 000 000
(c) $28 500 000
(d) $5 000 000

Q7.What will be the profit if materials costs fall by 5% ?

(a) $5 000 000

(b) $6 000 000
(c) $6500 000
(d) $8 000 00

Q8.One of the ways in which purchasingcan contribute to the profitability of the organisation
is by reducing waste through………………..

(a) Specification preparation and quantity of materials bought.

(b) Having adversarial relationships with suppliers.
(c) Avoiding quality control programs
(d) Responding to customer complaints sometimes.

Q9.Which of the following reflects the sustainability principle of the ‘triple bottom line’.

(a) Turnover, gross profit, net profit

(b) Decrease purchasing cost, increase value added, extended credit period.
(c) Profitability, social accountability, environmental sensitivity.
(d) Reduce stock, reduce staff, reduce overheads.

Q10.A buyer is quoted a price of $20 by a supplier for each item purchased. The buyer
negotiates a $2 reduction from the supplier. The buyer’s organisation sells the item to
customers for $36. Which of the following statements is true?

(a) The buying organisation will achieve a 10% profit for each item sold
(b) The buying organisation will achieve a mark-up of 100% on each item sold
(c) The buying organisation will achieve a mark-up of 50% on each item sold
(d) The selling organisation has made a loss of 10% on each item ordered by the buyer.

Q11. which of the following explains the difference between mark-up and margin?

(a) Margin is calculated by expressing profit as a percentage of costs while mark-up is

calculated by expressing profit as a percentage of selling price.
(b) Mark-up is calculated by expressing profit as a percentage of costs while margin is
calculated by expressing profit as percentage of selling price.
(c) Mark-up is the difference between costs and selling price while margin is the difference
between profit and selling price.

(d) mark-up is calculated by expressing profit as a percentage of costs while margin is

calculated by expressing selling price as percentage of costs.
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A supplier prepared the following information pertaining to his product. Analyse the
information and answer questions 12 and 13.

Total costs k75.00

Profit k25.00
Selling price k100.00

Q12.What is the supplier’s margin?

(a) 20%
(b) 22.5%
(a) 33.3%
(b) 25%

Q13. what is the supplier’s mark-up?

(c) 20%
(d) 22.5%
(e) 33.3%
(f) 25%

Q14. which of the following is not a limitation of cost-plus pricing?

(a) They ignore demand, competition and other influences on pricing.

(b) Cost-based prices are quite inflexible, and do not take into account changes or trends
in the external environment.
(c) They help a supplier to cover his costs and make a reasonable profit.
(d) The supplier may be ignoring potential profits.

Q15.The following are ways in which purchasing can contribute to organisational effectiveness
and increased profitability except:

(a) Making late changes to specifications and paying suppliers late.

(b) Cost reduction initiatives.
(c) Improving supplier performance.
(d) Quality improvement initiatives.

Q16. which of the following is not a way in which purchasing can add value?

(a) By selecting appropriate suppliers.

(b) By effective negotiation and/or tendering.
(c) By effective dialogue with user departments.
(d) By ordering from suppliers who are not pre-qualified for high value, critical purchases.

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Q17. which of the following is the correct way of differentiating efficiency from
effectiveness?

(a) Effectiveness is about minimising waste of resources in processes while efficiency

Is about working towards achieving objectives.
(b) Efficiency is about minimising waste of resources in processes while effectiveness is
about working towards achieving objectives.
(c) Effectiveness is about improving quality while efficiency is about maintaining
improved quality.
(d) None of the above.

Q18. Which of the following cannot be used as a measure of purchasing efficiency?

(a)Value of inputs for the supplier’s supplier.

(b) Basic purchasing price of inputs.
(c) Speed of transaction processing.
(d) Efficiency of organisational structure.

Q19.Which of the following is a correct measure of purchasing effectiveness?

(a) Quality of output.

(b) Quality of service to customers.
(c) Impact on profitability.
(d) The customer’s customers level of expenditure.

Q20. Which of the following is the first step to purchasing cost reduction?

(a) Understand the drivers for reducing cost.

(b) Understand why excess costs exist in the supply chain.
(c) Supplier segmentation
(d) Cost reduction strategy and tactics.