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Certified Professional In Supply Management

  • Answer 33 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Measures how effectively the organization is using the assets involved in a particular project. ROAE = (Net Income + Interest Expense After Tax) /Average Capital Employed.

2. ROI = Net Present Value of Cash flows from the Project / Total Capital Invested in the Project.

3. Where one division is the primary user of a commodity - product - or service so it negotiates the contracts for the entire company (other divisions).

4. Cost associated with having material on hand - two main ones. Ownership and taxes.

5. Annual Operating Income / Total Capital Invested

6. Two or more organizations (public or private) that join together to combine spend for common commodities. Members are usually active in the purchasing decisions even if a 3rd party makes the purchases for them.

7. Is a spec for service to be performed. Two components. 1. defines what product must look like or do and 2. quantitative to measure performance.

8. Are information request not binding on either party. Results are usually in the form of price list or catalogs and helps supplier in budgeting process. Potential draw backs - is that RFI's are overused and supplier may not respond.

9. Multiplying the book value by the constant depreciation rate at the end of each fiscal period. Assumes matching has a higher value at beginning of life than ant end and matches Depreciation with that assumption.

10. Total Operating Income / Total Sales

11. Also called inventory holding cost - are the costs associated with having inventory available - including the opportunity of invested funds - storage and handling cost; and taxes - insurance - shrinkage and obsolescence-risk cost. Four components of

12. Expenses that can be identified with individual units of output - typically direct materials and direct labor. Important for several reasons: 1. Direct cost have largest impact on supplier prices. 2. Reduced direct cost give bigger savings than reduc

13. The total cost of one unit of goods or services. It includes purchase price plus all other cost associated with the item or service over it's useful life - including other direct cost - policy costs and cost of non-performance.

14. Is the total accumulation of costs for an imported item - including purchase price plus freight - handling - duties - customs clearance and storage to a designated point.

15. Investigates the profitability of an organization in relation to it's sales. Net operating margin expresses profitability as a ratio of income to sales.

16. Are those cost that have both a fixed and variable cost component. such as supervisors salaries - pensions plans - utilities - and fuel.

17. With having material on hand is obsolesces - theft - damage and shrinkage.

18. X = Type of capital; Y = Total Capital; Z =the interest rate (cost) or each type of capital; S=sum. Example: Long term debt = 400K (capital type) Preferred stock = 300K (capital type) Total = 700K Financing cost: LTD: 6.2% PS: 10.5% Equation: 1. Deb

19. Are those cost that tend to remain constant regardless of the volume of operating activity. They decrease as a cost per unit when output is high - assigned to departments through cost allocation methods. Think: Rent - property taxes -

20. Used for more complex biding situations and detailed information where dialog w/ buyer and supplier are required with engineering and supplier. Potential problems is the time it takes to conduct.

21. Are those cost that change proportionately with the volume of production of goods or the performance of services. i.e.: direct material cost and direct labor cost.

22. Is a cost-analysis tool that incorporates the purchase price of equipment and all operating and related costs over the life of the item; including but not limited to maintenance - downtime - energy cost and salvage value.

23. Are any cost not directly identified with specific products or services but related to the normal operation of an co. AKA 'Overhead' & are composed of fixed cost - variable cost - & semi-variable cost.

24. The simplest to calculate and assumes that a machines depreciation is related to function of time not it's use.

25. 1. Offer to buy vs Offer to sell - 2. Informal bid/quotation - 3. Electronic solicitations (RFx) - 4. Competitive proposals - 5. Sealed bids / formal advertising - 6. Restricted competition - 7. Non-competitive negotiations - 8. Two step bidding - 9.

26. Takes the number of years of useful life of an asset - counts back to one - and adds the digits together. This method depreciates more in the first few years of an asset than the others.

27. Is an organizational policy and structure in which the authority and responsibility for most supply related functions and decisions are assigned to a central organization. Decisions are made in one spot - not all people are necessarily located in one

28. Is an profit or non-profit company that serves members in a single industry such as hospitals - Universities or country governments. Co-op members play NO role in the management of the co-ops activities - but can suggest suppliers.

29. When evaluating services - do not look at the cost of the services - look at if it reduces total cost to the process or organization.

30. Return on total assets measures how effectively the organization is using the entirety of assets. ROTA = Net Income / Total Assets

31. The combination of the purchase or acquisition price of a good or service and any additional cost incurred before or after the product or service delivery.

32. A) Performance & design specs - define what the product or service must do. Often used with capital equip & services. Performance spes. gives supplier the most control over how to satisfy the requirement. Design Specs gives buyer most control. B) Int

33. What is the cost of capital to finance the inventory. Two ways to get the cost. One - use the companies short-term borrowing rate. or 2. The company's required rate of return on an investment.