1. Researching market conditions helps to improve 6. Which of these are variable costs?

negotiations with suppliers by providing the buyer

a) Staff overtime
with.
b) Premises cost
a) Up to date technical information on the c) Insurance costs
product d) Materials cost
b) Details of what pricing other companies are
a. 1 and 2 only
offering
c) Information on the standards applied to the b. 1 and 4 only
product
d) Details of trade fairs the supplier is attending c. 2 and 3 only

2. The main benefits of using standards in a d. 2 and 4 only

specification is. 7. Planning the design of a new school, an architectural
a. British standards are aligned with other company is Keen to specify the exact material
international standards requirements for a science laboratory but allow some
b. It provides a clear guide with no ambiguity or flexibility in the construction of the classrooms for the
uncertainty use of sustainable materials.
c. It accurately reflects the buyers' requirements Which specification type should be used for the
for the supplier science lab?
d. It will specify the latest technology standards
are kept up to date a. Prescriptive
b. Performance
3. Comparing what something should have cost with c. Design
what it has actually cost is known as d. Functional
a. Variance analysis 8. A supermarket is intending to invest in it's links to
b. Supplier analysis the supply chain via e-procurement to help ensure it
c. Cash-flow analysis meets daily typical consumer stock requirements. How
d. Profit and loss analysis could e-procurement best help to control spend and
4. Which of the following provides the buyer with the help towards achieving this goal?
greatest negotiating advantage? a. Share sales trend to manage Stock
a. Product is in short supply and high demand b. Set up standardized repeat orders
b. Product is freely available from multiple c. Monitor and minimise deliveries
suppliers d. Monitor regional spend trends
c. Product is seasonable and in season 10. A house builder has requested use of a sustainable
d. Product is in stock with a single supplier low carbon cladding material to be procured at a
5. Which of these have negative effect on cash-flow? competitive rate within the project budget. Who
would be the key internal stakeholder in defining the
1. A supplier reduces it's payment terms business requirement
2. The bank grants a loan to the company
3. A customer agrees upon purchase A. Commercial team
4. Increase in the amount of stock held B. Procurement team
a. 1 and 4 only C. Environmental Team
b. 2 and 3 only D. Design team
c. 2 and 4 only 11. The buyer's database is regarded as a primary data
d. 3 and 4 only source. Which of the following is also a source of
primary data?
 a. Price lists collected from supplier's
representatives at trade fairs
b. Price listings on comparison websites and
market exchanges
c. Published economic indices such as retail price
index(RTI)
d. d. Financial and trade press. including journals
from Professional bodies
12. A benefit (to the specifying company) of using
performance specifications to communicate
requirement to potential suppliers is that
a. Supplier quotations and proposals are easy for
a buyer to compare as supplier innovation is
discouraged
b. the risk of not meeting the specification sits
with the supplier and must be retified at their
time and cost
c. a performance specification saves time by
limiting the number of suppliers that can
provide quotation
d. the use of brand names allows the specifying
company to precisely describe their
requirements
13. What is the disadvantage of sourcing from a
supplier which is a monopoly in the market?
a. The buyer will not be able to buy the quantity
required
b. The buyer has a lack of negotiating power on
cost
c. The buyer will be unable to effectively manage
the contract
14. What is the difference between value analysis and
value engineering?
a. Value analysis is conducted by the end user of the
goods or services, whereas value engineering is
conducted by the supplier of goods and services.
b. Value analysis is used for existing goods or
services whereas value engineering is conducted
at the design stage of new goods and services.
c. value analysis is used for service requirements
whereas value engineering is used for goods or
products.
d. Value analysis is used in the public sector only
whereas value engineering is used in the private
sector only
15. Robert is a buyer at Pickton's farm product, a
manufacturer of food products that are sold to
supermarkets. Robert will be sourcing from local
farmers to supply PSP with raw materials for PFP's
product.
What is the major supplier chain risk that Robert needs
to be aware of which is specific to this market?
a. Extreme or unexpected weather conditions may
affect supplier's ability to supply PFP in line with
quantity and timing requirements
16. Albert has recently joined fish industries as a buyer.
He has been instructed to negotiate with a number of
suppliers to strengthen the suppliers payment terms
from 30 days to 60 days. Why would FI want to
lenghten suppliers' payment terms?
a. It will reduce the amount of paperwork
required
b. It will improve the relationship between FI and
it's suppliers
c. It will improve FI's negotiating position for
future negotiations
d. It will improve FI's cash flow position
17. Use of international standards in specification is
useful when
a. the purchasing organisation does not know the
quantity of goods it requires
b. The goods needs to meet international quality
levels to be sold onward
c. the goods will only be sold in the domestic
market of the purchasing company
d. the purchasing company is using e-auction to
conduct the sourcing process.
18. The role of the marketing function in the
development of specifications is
a. To ensure the organisation gains competitive
advantage in the product features
b. to ensure that the design department is
discouraged from using conformance
specification
c. to coordinate the stakeholders because the
procurement team is less suited for this role
d. to ensure that the brand name is given
precedence over the technical aspects of the
specification
19. Standards are documents that stipulate minimum 1. There is potential for backward integration
levels of performance and quality of goods and
2. Products and services are undifferentiated
services. However, standards have some disadvantages
of which one is that 3. Demand is price sensitive
a. standards encourage variety proliferation, 4. There are low switching costs
confusion and uncertainty among producers,
suppliers and users a. 1and 4 only
b. standards increase the processing time and cost as b. 2 and 3 only
each user prefers his/her own standard c. 3 and 4 only
c. Standards focus on technical parameters and they d. 1 and 2 only
disregard all environmental requirements 23. Suppliers are powerful in which of the following
d. Standards tend to be static and they fail to reflect situations?
the latest technology or performance practices
1. There are potential for backward integration
20. The buyer for WTZ Company is considering using
conformance Specification for the new requirement 2. Products and services are undifferentiated
from the technical department. To be effective in this 3. The switching costs for buyer's is high
approach, the buyer needs to be fully aware of the
features of conformance such as 4. There are few substitute products

a. A greater share of the conformance specification e. 1and 4 only

risk is borne by the suppliers if it turns out to f. 3 and 4 only
be unfit for the purpose g. 1 and 2 only
b. The buyer must ensure that the conformance h. 1 and 3 only
specification is flawless and sufficiently clear
24. Variances are the difference between the budgeted
for the suppliers to act on
costs and the actual costs.
c. Conformance specifications will encourage
suppliers to develop innovative solutions for When are material cost variances likely to arise?
the customer
1. When the actual costs are entered as they occur
d. the buyer does not need technical expertise in
against the budget amount
developing a functional conformance
specification 2. When the supplier's system displays prices on the
invoices but not on the delivery notes
21. Buyers can ascertain the prices by examining
information provided by primary and secondary 3. When the new financial accountant misplaces a
sources of market data which of the following is a batch of unprocessed goods received notes
secondary source of market data
4. When the supplier changes from manual to
a. Supplier prices provided on price comparison electronic invoicing systems for all transactions
website
b. Historical records of supplier prices on the a. 1 and 2 only
buyer's database b. 2 and 3 only
c. Price brochures provided by the supplier's
sales team c. 1 and 3 only
d. Supplier's prices provided on the buyer's d. 2 and 4 only
request for quotation
25. One of the competitive forces known to influence
22. Which of the following are threats to substitute in markets is referred to as threats of new entrants which
Porter's five forces model can be explained as..
 a. Check the supplier database to identify other
suppliers to compete in the next tender when
the current contract expires
b. suppliers from small and medium enterprises
seeking recognition by threatening legal action
c. The buyer changing from single to dual
sourcing approach whereby the second best
bidder becomes an alternative supplier
d. suppliers striving to penetrate the market
through such strategies as innovation and
aggressive competition
25. One of the competitive forces known to influence
markets is referred to as threats of new entrants which
can be explained as..
a. Check the supplier database to identify other
suppliers to compete in the next tender when the
current contract expires
b. suppliers from small and medium enterprises
seeking recognition by threatening legal action
c. The buyer changing from single to dual sourcing
approach whereby the second best bidder
becomes an alternative supplier
d. suppliers striving to penetrate the market through
such strategies as innovation and aggressive
competition
26. Which of the following would allow an established
company to develop a competitive advantage over
new entrants to it's market?
a. Reduce advertising costs
b. Economics of scale
c. International management re-organisation
d. Selling only imported goods
27. If established suppliers in a market start a price
war, is this a form of competitive rivalry?
a. Yes, economies of scale are a barrier to entry of
new entrants
b. No, it makes the supplier more powerful, they
force prices down in a price war
c. No, the volume purchased by the buyer or industry
is not important
d. Yes. it is an aggressive strategy, one firm's gain is
another firm's loss
28. Is ISO 14000 a series of environmental standards?
a. No, it's series of quality standards including
continous improvement
b. Yes, it's series on environmental standards
including life cycle analysis
c. Yes, its series of information security standards
including financial information.
d. No, it's series of risk management standards
including achieving objectives
29. Which of these are advantages of using a
conformance specification? Select two that apply
a. Enabling supplier flexibility and innovation
b. Enabling value for money solutions
c. Forces consideration of actual needs
d. Evidence of requirements in dispute
e. A smaller supplier base to select from
30. Which of these purchases by a furniture
manufacturer company are direct costs to the
company! Select two that apply
a. Salary of the office accountant
e. Wages paid to the production line employees
b. Utility bill from electric provider
c. Purchase of the wood for furniture production
d. Advertising in a home interiors magazine
I see that you sent the messages early this morning,
thank you so much. I have tried the questions and I
scored above average.
31. A large retail firm is seeking to expand further into
online shopping with the current ratio being 85% shops
and 15% online. The procurement manager has
suggested that benchmarking against a larger online
supplier would be useful.
Is the procurement manager correct to suggest this?
a. Yes because it will demonstrate how and where
performance levels need to be achieved
b. No, because the company aren't ethically allowed
to carry this type of analysis out
c. Yes because the company can copy their
production. strategy to improve sales
32. Raheem is the head of procurement at a Care
home. He decides to use a performance specification
for the purchase of a new intelligent patient record IT
system. Is this a correct approach?
a. Yes. as it helps to drive innovation
 b. Yes, as it tells the supplier the exact requirement
c. No, the approach is difficult to manage
d. No, it will take too long to acquire the IT system
33. When studying whole life costing, Melissa is
reviewing end of life costs. Which of the following
factors relate to end of life? Select two that apply
a. Maintenance costs
b. Purchase costs
c. Usage costs
d. Disposal costs
e. Decommissioning costs
34. When developing a business case for a new
product, a procurement department must consider
a. terms and conditions of contract
b. the supply market
c. the supplier positioning model
d. Indirect costs
35. XTC LTD manufacture 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 and will require the source of new materials to
compete.
It presently 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?
a. Create a new specification for the existing
supplier
b. Issue a purchase order to a new supplier
c. Create a new specification for a new supplier
d. Create a call off contract from the existing
supplier
36. John has used. a conformance specification for the
purchase of an aircraft parts. Was John correct to use a
conformance specification?
a. Yes, because technical dimensions are necessary
for health and safety reasons
b. No because he wanted to include product
drawings.
c. Yes because he wanted a wide range of solutions
d. No because the part is restricted by law for health
and safety reasons
37. Which of the following are advantages of using
standards within a specification?
1. Remove ambiguity of requirements
2. Assists negotiations with suppliers
3. Assist accurate comparison of bids
4. Increased time of market
a. 1 and 4 only
a. b 2 and 4 only
b. 1 and 3 only
c. 3 and 4 only
38. Roger is responsible for capital equipment
purchases within a local hospital. To assist in
developing a business case Roger would like to
calculate the payback period for the purchase of a high
powered microscope. If the microscope costs £200,000
and will generate annual revenue of £50,000 when
would the payback period be?
a. 2 years
b. 3 years
c. 4 years
d. 8 years
39. Buyer power may make a supply market more
competitive. Which of the following are examples of
buyer power?
Select two that apply
a. Ability to easily switch suppliers
b. Collusion between competitor suppliers
c. Suppliers are limited in number
d. High barriers of entry exists for new suppliers
e. Consumer large in size relative to suppliers
40. John has been asked to develop a business case
before obtaining approval to purchase a large piece of
capital equipment for a glove manufacturing unit. Is
this the right thing to do?
a. Yes because this will assist the purchase order
b. Yes because this will help compare alternatives
and options
c. No because this consideration is not Responsibility
d. No because this can lead to business focus thinking
41. A wide range of factors may be taken into account
by suppliers when setting or negotiating prices. Which
of the following are internal factors in pricing 4. The use of outsourced subcontracted and casual
decisions. Select two that apply labour

a. Strategic objectives of organisation Which of the below business sectors does JM Group
b. Competitor pricing belong to
c. Customer perception of value
a. a Agriculture
d. Environmental factors affecting raw materials
b. Engineering
e. Where the product is in it's life cycle
c. Manufacturing
42. Alexander has identified that he wishes to use d. Construction
performance based specification for the purchase of a
46. Which one of these business sectors is most
new HR staffing schedule system. Was this the correct
concerned with business objectives that include having
choice of action?
responsive production processes that can react quickly
a. No because technology is changing rapidly to market changes has an emphasis on brand names
b. Yes because a specific blueprint is necessary for that can support the sales function and can launch new
functional requirements products on sale quickly
c. Yes because suppliers have greater technical
a. Manufacturing
knowledge than the buying organisation
b. FMCG
d. No because there is clear objective criteria for
c. Services
evaluating alternative solutions.
d. Engineering
43. Head of procurement Harpal would like to build up
47. What criteria can be applied in the creation of a
an overall picture of the manufacturing operational
business case?
costs for the production of a textbook. Which of the
following are classified as indirect costs? Select two a. a costs and benefits
that apply b. Charges and fines
c. Delivery and storage
a. Utilities, electricity
d. Invoices and payments
b. Glue costs for books
c. Advertising costs 48. When considering procuring a product that they
d. Machine operator salary have never purchased previously, a company should
e. Royalties to Author consider
44. Which of the following are primary sources of a. a force majeure clause
market data for costs and prices. Select two that apply b. How many suppliers are available
c. Key performance indicators
a. Published economic indices
d. Indirect costs
b. Industry press
c. Supplier marketing communications 49. When inviting tenders for the procurement of
d. Price comparison website some capital equipment that will be expected to
e. Trade fairs operate for at least five years, what should the
procurement take into account when analysing the
45. JM Group has faced the below challenges in recent
whole life costs of the equipment.
decades
a. The supplier's balance sheet
1. A poor reputation for quality, delivery, cost control
b. Internal stakeholders
and health and safety
c. maintenance schedule
2. Pressure to reduce it's environmental impact d. Terms and conditions of contract
e. No because technology is changing rapidly
3. An adversarial supply chain climate and fragmented
supply chains
50. A company finished product has fifty component
that have to be purchased. It wants to reduce costs
and believe the number of components can be
reduced to thirty by looking at each individual
component or removing those that do not add
anything to the finished product.
What is this process called?
a. Value analysis
b. Standardisation
c. value engineering
d. Market testing
51. A procurement department has asked for a pricing
structure that will allow the supplier to cover their
costs plus £10000 to cover the supplier's profit.
b. Substitute power
c. Supplier bargaining power
d. Buyer bargaining power
54. Josh a junior procurement analyst was asked to
analyse the cost breakdown 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
corrections. Which of the following do you believe 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

What is this arrangement called? 3. Direct costs are also known as overheads for the
organisation
a. Cost plus shared incentive
b. Cost plus a percentage fee 4. Indirect costs also known as the marginal costs for
c. Cost plus an incentive the organisation
d. Cost plus a fixed fee
a. 1 and 2 only
52. A company looking after public transport including b. 2 and 3 only
maintaining bus and train stations which are used c. 3 and 4 only
extensively by the general public. What criteria should d. 1 and 4 only
the procurement department take into account in the
55. What are the typical uses of specifications in
specification for a cleaning contract that will have the
procurement and supply?
most impact on the people using the building?
Select two that apply
a. The style of uniform the staff should wear when
cleaning a. Define the requirements
b. What reference a cleaning contractor should b. Provide supplier appraisal and selection
provide with the quotation c. Defining bargaining strength of the buyer
c. The frequency that the buildings will be cleaned d. Provide a means of evaluating the quality of
d. Contracts penalty clauses for non performance of conformance
the cleaning contract e. Minimise bargaining strength of the supplier
53. Lucy, a junior procurement analyst has been asked 56. When purchasing routine items such as common
to assess the competitive forces in the garden stationary supplies, how can the business need for
furniture market. functional efficiency be met?
XYZ LTD is the largest producer of garden furniture in 1. Including incentives and penalties in contracts
the country. It produces 70% of all the furniture
manufactured. Whilst the second largest manufacturer 2. Introducing e-procurement solutions
produces less than 5% of the garden furniture for the 3. Introducing competitive bidding
country.
4. Vendor management inventory
Which power does XYZ LTD possess?
a. 1 and 2 only
a. Purchasing power b. 2 and 3 only
 c. 2 and 4 only d. Notes
d. 3 and 4 only
46. Which one of these business sectors is most
57. A company is considering buying a new computer concerned with business objectives that include having
system to handle large amounts of personal data and responsive production processes that can react quickly
expects the system to perform in a particular way. to market changes has an emphasis on brand names
that can support the sales function and can launch new
Which of the following should be included in the
products on sale quickly
performance specification? Select two that apply
a. Manufacturing
a. Lists output
b. FMCG
b. List of input
c. Services
c. Technical drawings
d. Engineering
d. Brand name
e. System operating conditions

58. When estimating future costs, procurement , 1. B

procurement needs to take account of a supplier's
2. B
pricing strategy. If the supplier is skimming the market
their prices will be lower. Is this true or false? 3. A
a. False. a supplier will have lower prices when 4. B
penetrating the market.
5. A
b. False, a supplier will have higher prices when
skimming the market 6.B

c. True. a supplier has to sell more products at a low 7.A

price to stay in business 8. A
d. True. a supplier will calculate and add on a low mark 9. C
up for profit
10. C
59. What are the sources of information that can be
used to pay for create specification? 11. A

a. Sketches 12 B
b. Details 13. B
c. Standards
d. Notes 14.B

60. Which competitive forces influence markets in our 15A

modern environment?
16. D
a. Manufacturing of goods and services
17. B
b. Bargaining strength of suppliers and buyers
c. Production companies and relationships 18A
d. Increase cost in supply and deliveries
19D
59. What are the sources of information that can be
20. B
used to create specification?
21. A
a. Sketches
b. Details 22. C
c. Standards
23 B 54A

24 B 55A,D

25. D 56C

26 B 57A,E

27 D 58A

28. B 59C

29. C,D 60B

30 B, D

31. A

32.A

33. D, E

34.B

35 D

36 A

37 C

38 C

39 A, E

40 B

41 A, E

42 C

43 A, C

44 C, E

45D

46 B

47 A

48 B

49. C

50 A

51D

52C

53C