November 30 2009
ISM 630-007 Dumps
C.P.M. Module 3: Value Enhancement Strategies
- Exam Number/Code : 630-007
- Exam Name : C.P.M. Module 3: Value Enhancement Strategies
- Questions and Answers : 201 Q&As
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PrepKing.com ISM 630-007 Sample Questions
1. 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
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 is the FIRST step in standardization?
A. Collecting data.
B. Simplifying standards.
C. Establishing objectives.
D. Publicizing the program.
Answer: A
4. 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
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5. 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
6. 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
7. 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
8. 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.
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Answer: C
9. 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
10. 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
11. 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
12. Which of the following do NOT provide economic forecasts?
A. ISM Report On Business(r).
B. Bureau of Labor Statistics.
C. Department of Commerce.
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D. Thomas Register.
Answer: D
13. 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
14. 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
15. 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
16. 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.
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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
17. Which of the following criteria would a project or process targeted for improvement
generally NOT meet?
A. It is in the process of change.
B. It is relevant to a key product or service issue.
C. It is within the control or influence of the team.
D. It is likely to contribute to organizational goals.
Answer: A
18. When is the timing of purchases MOST important?
A. When a market has price and supply stability.
B. When a market has price and supply instability.
C. When a market has unstable supply with predictable prices.
D. When a market has reasonably stable supply with substantial fluctuation in prices.
Answer: C
19. Which of the following can be used to spot abnormalities in a process, as well as
compare actual measurements to customer or engineering specifications, and show
if a distribution is centered at an expected place?
A. Pareto charts.
B. Area graphs.
C. Histograms.
D. Pie graphs.
Answer: C
20. Which of the following BEST describes the difference between evaluation of a
product and value analysis?
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A. Value analysis is more concerned with “make-or-buy” issues.
B. Evaluation of a product is more concerned with cost issues.
C. Value analysis focuses more on economy and efficiency.
D. Value analysis is more concerned with product liability.
Answer: C
21. Which of the following statements is the MOST accurate?
A. The term “2% 10/net 30″ mean that two percent of the invoice is due within 10 days
from the date of the invoice. The balance is due within 30 days from the date of the
invoice.
B. The term “2% 10/net 30″ mean that there is a 2% discount off the final price if paid
within 10 days from the date of acceptance. The balance is due within 30 days of the date
of the invoice.
C. The term “2% 10/net 30″ mean that there is a 2% discount off the final price if paid
within 10 days from the date of the invoice. If not, the balance is due in 30 days from the
date of the invoice.
D. The term “2% 10/net 30″ mean that there is a 2% discount off the final price if paid
within 10 business days from the date of the invoice. If not, the balance is due in 30 days
from the date of the invoice.
Answer: C
22. TestInside has acquired a major manufacturer of electronic components, many
of which can be used in the assembly of vehicles. Which of the following BEST
describes the type of strategy used by this TestInside?
A. Vertical integration.
B. Ownership interest.
C. Privatization.
D. Outsourcing.
Answer: A
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23. Which of the following consideration would a buyer generally NOT take into
account when determining the most effective financing method for a piece of capital
equipment that has a lead time of more than 12 months?
A. Cash flow.
B. Depreciation.
C. Interest rates.
D. Supplier financing.
Answer: B
24. Which of the following statements BEST illustrates the advantage of early supplier
involvement (ESI)?
A. Early supplier involvement (ESI) requires supplier input into product reconfiguration.
B. Early supplier involvement (ESI) reduces the need for new technology.
C. Early supplier involvement (ESI) promotes higher quality.
D. Early supplier involvement (ESI) ensures lower prices.
Answer: C
25. You work as a buyer at TestInside. You receive a requisition from
TestInside’s accounting department for a new photocopier. The current
photocopier needs has a residual value of $600 but needs to be replaced
immediately. However, TestInside has frozen capital spending for all
non-manufacturing related equipment.
You thus call a local distributor, who offers to lease TestInside a copier with one
year free maintenance and supplies. The costs of such maintenance agreements
typically average about $.01 per copy. The distributor also offers TestInside
$450 for its existing photocopier.
Which of the following would be your BEST course of action in this situation?
A. Sign a capital lease, based on 100,000 copies per month.
B. Purchase the equipment at a cost of $16,000, minus a trade-in of $1,200.
C. Sign a third-party lease through a bank, based on 100,000 copies per month.
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D. Sign an operating lease through the distributor for payments of $.015 per copy, based
on 100,000 copies per month.
Answer: D
26. TestInside decides to stops making steel slabs. Instead TestInside will start
buying steel slabs from another supplier for use in producing finished products in
TestInside’s facilities. What is this practice known as?
A. Outsourcing.
B. Pool buying.
C. Reciprocity.
D. Integration.
Answer: A
27. Which of the following is NOT applicable to valuation of inventory?
A. FIFO.
B. LIFO.
C. The ABC concept.
D. Lower of cost or market.
Answer: C
28. Which of the following techniques can be used to reduce financial risk when
purchasing globally?
A. Global market analysis.
B. Inventory stockpiling.
C. Currency contracts.
D. Offshore offices.
Answer: C
29. When are the prices of platinum and silver generally established?
A. At the time these commodities are mined.
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