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Exam : ISM 630-007
Title : C.P.M. Module 3: Value Enhancement Strategies

1. Which of the following should a purchaser utilize when there is a need to minimize
financial risk in a sensitive market?
A. Cash flow management.
B. Long-term relationships.
C. Market demand analysis.
D. Hedging using futures contracts.
Answer: D

2. Which of the following statements is FALSE?
A. An operational lease has a non-cancelable term varying from hours to years.
B. An operational lease is a total financial commitment by the lessor.
C. In operational leases, payments are fixed payments per period.
D. Operational leases stress service.
Answer: B

3. Which of the following favors making the part in a "make-or-buy" decision?
A. When design secrecy is required.
B. When volume requirements are small.
C. When production facilities are limited.
D. When there is a desire to maintain a multiple-source policy.
Answer: A

4. Which of the following represents the MOST common reason for a public or
nonprofit corporation to use lease/purchase agreements to obtain equipment?
A. To gain tax advantages.
B. To avoid capital expenditures.
C. To reduce maintenance needs.
D. To gain depreciation advantages.
Answer: B

5. Which of the following are the two basic categories of costs associated with
inventories from a management point of view?
A. Supplies and services costs.
B. Storage and incremental costs.
C. Carrying costs and acquisition costs.
D. Obsolescence and deterioration costs.
Answer: C

6. Which of the following is the MOST commonly sought-after piece of inventory
information?
A. The date the inventory is taken.
B. The current price of the items.
C. Inventory I.D. numbers.
D. Quantities.
Answer: D

7. When would a purchasing manager generally use a third-party lease as a financing
instrument?
A. When purchasing equipment from the manufacturer with someone else’s money.
B. When acquiring equipment from one party and maintenance from another.
C. When arranging an assignment agreement with a bank.
D. When transferring the asset to the internal customer.
Answer: A

8. Which of the following is the FIRST step in standardization?
A. Collecting data.
B. Simplifying standards.
C. Establishing objectives.
D. Publicizing the program.
Answer: A

9. Which of the following is NOT an appropriate consideration when seeking to
mitigate seasonal capacity issues?
A. Safety stock levels.
B. Transportation costs.
C. Forecasting accuracy.
D. Seasonal sales forecasts.
Answer: B

10. Which of the following represents the BEST strategy for minimizing price risk in a
falling market?
A. Hedging.
B. Forward buying.
C. Hand-to-mouth buying.
D. Buying to requirements.
Answer: C

11. Which of the following do NOT provide economic forecasts?
A. ISM Report On Business(r).
B. Bureau of Labor Statistics.
C. Department of Commerce.
D. Thomas Register.
Answer: D

12. You work as a purchaser at TestInside. You are negotiating a contract for which
production and delivery will be stretched out over a 24-month period. You want to
get the best price. Which of the following should you include in the contract?
A. A provision to accept all material produced under the contract.
B. A provision to cover changes in rates for material and labor.
C. A provision to eliminate penalties for late deliveries.
D. A provision to cover unforeseen production delays.
Answer: B

13. Which of the following represents the MAIN reason why a fully documented
permanent summary record of a "make-or-buy" analysis should be maintained?
A. To respond to charges of favoritism by unsuccessful bidders.
B. To serve as a useful source of information in future situations.
C. To support cost-of-goods-sold (CGS) figures for tax purposes.
D. To justify the participation of all departments that were involved in the analysis.
Answer: C

14. Which of the following should generally make a "make-or-buy" decision?
A. Engineering Management.
B. Purchasing Management.
C. Production Management.
D. General Management.
Answer: D

15. TestInside has been experiencing numerous stockouts on a production item.
Which of the following is LEAST likely to cause this problem?
A. Faulty sales forecasts.
B. Incorrect order points.
C. Increased supplier prices.
D. Problems with incoming shipments.
Answer: C

16. What is generally the PRIMARY motivation for outsourcing in the health care
sector?
A. To reduce technological risk.
B. To shift patient liability.
C. To reduce labor costs.
D. To implement JIT.
Answer: C

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Exam : ISM 630-005
Title : C.P.M. Module 1: Purchasing Process

1. Which of the following should the buyer FIRST do when a using department requests that the buyer purchase a specific brand-name product?
A. Attempt to negotiate a lower price with the supplier of the brand-name product.
B. Attempt to persuade the user to furnish performance specifications.
C. Search for competitive suppliers that furnish similar products.
D. Appeal the request to higher purchasing management.
Answer: B

2. TestInside.com has a 10% profit margin before taxes and spends 50% of its sales dollar on materials. What percentage reduction in material costs for TestInside.com to achieve an increase of 5% in sales?
A. 1%
B. 2.5%
C. 5%
D. 7.5%
E. 10%
Answer: A

3. In which of the following countries outside of the United States do U.S. patentees enjoy protection against infringement?
A. In countries that have full diplomatic relations with the United States.
B. In countries that are signatories to patent conventions only.
C. In European Union member counties only.
D. In GATT member countries only.
E. None of the above.
Answer: B

4. 5%
C. 5%
D. 7.5%
E. 10%
Answer: A
2. Which of the following statements regarding the process of reviewing supplier samples and/or demonstrations with user departments and functional departments such as quality, engineering, research, and administration, are FALSE?
A. It increases the amount of time involved in making a buying decision.
B. It is an example of purchasing’s role as a service function within the organization.
C. It reduces purchased prices by allowing purchasing to make the final buying decision.
D. It leads to improved quality because the supplier will have a better understanding of user requirements.
Answer: C

5. In which of the following payment methods used in global sourcing, does the seller present only its draft on the buyer to its bank for collection, while the shipping and other documents are sent directly to the buyer?
A. Open account.
B. Sight draft collection.
C. Clean draft collection.
D. Confirmed letters of credit.
Answer: C

6. Which of the following would NOT be included in a commodity record?
A. Supplier financial performance.
B. A list of sources.
C. Price history.
D. Quantities.
Answer: A

7. You work as a purchaser at TestInside.com. Your brother works as an engineer for a major supplier for TestInside.com. Your brother asks you for input on a new product line that his company is developing. The product is quite similar to one that TestInside.com currently buys from another company. Which of the following is the PRIMARY ethical issue that arises in this situation?
A. Fraud
B. Bribery
C. Nepotism
D. Conflict of interest
Answer: D

8. You work as a buyer at TestInside.com. You place an online order containing only price, quantity, and description. You do NOT have a written contract with the supplier. The parts fail inspection, and the supplier claims it is under no obligation for the parts. What would be your FIRST line of action in this situation?
A. Accept the parts and write a contract covering the supplier’s obligations in future online transactions.
B. State that an implied warranty for merchantability is applicable to the parts.
C. Use a manual order system for all future orders with the supplier.
D. Accept the parts with no further comment.
Answer: B

9. Which of the following is the MOST important aspect of service contract administration?
A. Aggressive management of the contract.
B. Selection of the right source.
C. A fair and reasonable price.
D. A sound statement of work.
Answer: D

10. For its impact on which of the following should price variances of purchased materials be forecasted?
A. Cost of goods sold.
B. Inventory levels.
C. Supplier ratings.
D. Carrying costs.
Answer: B

11. Which of the following is NOT a goal of direct release systems?
A. Improved usage forecasting.
B. Reduced paperwork for purchasing.
C. Lower purchase order transaction costs.
D. Increased accountability of the selected supplier.
Answer: A

12. Which of the following is generally NOT included in the cost analysis process?
A. Semi-variable costs.
B. Overhead costs.
C. Indirect costs.
D. Sunk costs.
Answer: D

13. TestInside.com has a contract with Road Haulers, Ltd. to dispose of toxic material at a site in New Orleans. However, Road Haulers, Ltd. decides to use a site in Dallasinstead. The site at Dallas is a cheaper but disreputable source. Who has primary liability in this situation?
A. TestInside.com.
B. Road Haulers, Ltd.
C. The site at New Orleans.
D. The site at Dallas.
Answer: A

14. At which of the following times does the purchased raw material physically enters purchased goods inventory in a manufacturing stockless inventory program?
A. Never, since it becomes work in progress or goods shipped.
B. Five days before it is needed.
C. One day before it is needed.
D. At the time of delivery.
Answer: A

15. 5%
E. 10%
Answer: A

16. Which of the following is MOST likely to assure receipt of materials against the invoice from the supplier?
A. The Receiving Department.
B. The Production Department.
C. The Purchasing Department.
D. The Accounts Payable Department.
Answer: D

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Exam : ISM 630-008
Title : C.P.M. Module 4: Management

1. Which of the following is LEAST important when evaluating buyer performance?
A. Quality of work.
B. Quantity of work.
C. Personal appearance.
D. Communication skills.
Answer: C

2. Which of the following does profit planning begin?
A. Business plans.
B. Long-range strategic plans.
C. Short-range strategic plans.
D. Strategic and operational plans.
Answer: D

3. Which of the following is NOT an advantage of promoting from within the
purchasing organization?
A. Keeping morale high.
B. Reducing training costs.
C. Stimulating individual performance.
D. Bringing experience in complementary areas.
Answer: D

4. Which of the following is NOT an appropriate measure of performance for a
purchasing department?
A. Average time to place requisitions.
B. Total dollars contributed to profits.
C. Total dollars purchased per supplier.
D. Total product cost reduction compared to budget.
Answer: C

5. Which of the following can BEST enhance a measurement and control system for
evaluating buyer performance?
A. Including the buyer in the design of the system.
B. Including human resources in the design of the system.
C. Making a composite measurement of efficiency and effectiveness.
D. Being sufficiently broad in scope to allow the measurement of all contingencies.
Answer: A

6. You work as a purchasing manager at Certkiller .com. An employee that has been at
Certkiller .com for 20-years has become accustomed to coming to work 30-45
minutes late. Initially, this was due to child-rearing responsibilities, but now is a
simply habit. The supervisor has asked the employee several times if there was a
problem and the answer has always been "no." The problem is beginning to have a
negative impact on the morale of the rest of the department. Which of the following
would be your BEST course of action in this situation?
A. Dismiss the employee.
B. Have the employee attend counseling sessions.
C. Ask the human resources department to intervene and find a solution to the problem.
D. Set goals with the employee to improve on arrival time, and include a written report in
the employee’s file.
Answer: D

7. Which of the following would NOT be included in a typical audit of the purchasing
department in a manufacturing operation?
A. Inspection.
B. Organization policy.
C. Purchasing operations.
D. Inventory management.
Answer: A

8. Which of the following theories suggests that managers can attain the greatest level
of employee motivation by determining the most desirable outcomes?
A. Theory X.
B. Theory Z.
C. Expectancy theory.
D. Scientific management.
E. Motivation-Hygiene theory.
Answer: C

9. Certkiller .com has more than 10,000 employees located on two regional branches
and on several smaller branches. Annual purchases of goods and services for
Certkiller .com exceed $150 million. In which of the following ways would
Certkiller .com LEAST likely benefit from a highly centralized purchasing function?
A. Improvements due to decreased duplication of effort.
B. Adherence to organization-wide standards and objectives.
C. Savings from standardization and improved economies of scale.
D. Satisfaction of product and source preferences for internal customers.
Answer: D

10. Which of the following is NOT a good indicator of purchasing department
performance?
A. Quality rejection rates for major items.
B. Number of purchase orders issued.
C. Percentage of on-time deliveries.
D. Number of stockout situations.
Answer: B

11. Which of the following statements regarding the orientation of a buyer trainee are
FALSE?
A. The trainee should be informed of personal growth opportunities.
B. Orientation and training should be conducted separately during the trainee’s initial
months on the job.
C. The trainee should be informed that his/her performance will be evaluated during
orientation and later on.
D. The trainee should be advised of purchasing’s major staff and line activities.
Answer: B

12. Which of the following is generally NOT strategic in nature?
A. New advertising schedule implementation.
B. New dividend policy direction.
C. New product development.
D. New sources of financing.
Answer: A

13. Under which of the following circumstances is negative feedback appropriate?
A. Soon after the occurrence of the faulty behavior.
B. In the presence of other managerial personnel.
C. In the presence of other team members.
D. It is never appropriate.
Answer: A

14.
Answer: C
4. Which of the following can BEST enhance a measurement and control system for
evaluating buyer performance?
A. Including the buyer in the design of the system.
B. Including human resources in the design of the system.
C. Making a composite measurement of efficiency and effectiveness.
D. Being sufficiently broad in scope to allow the measurement of all contingencies.
Answer: A

15. You work as a purchasing manager at Certkiller .com. A female employee has been
working for Certkiller .com for about 12 years and has 3 years to go until her
scheduled retirement. Recently, she was laid off from her position, and her duties
were absorbed by younger workers in the department. Under which of the following
is she MOST likely to have a claim against the company?
A. Equal Employment Opportunity Act.
B. National Labor Relations Act.
C. Age Discrimination Act.
D. Executive Order 11246.
Answer: C

16. Which of the following documents is MOST important in transportation?
A. Bill of materials.
B. Bill of lading.
C. Bill of sale.
D. Manifest.
Answer: B