mngt206 managment s00 exam1 - r28,— MANAGEMENT 205"...

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Unformatted text preview: r28 ,— MANAGEMENT 205 _" Mk?» MID PRINCIPLES OF PURCHASING EXAM NUMBER ONE Part 1 (four golnts each} 1. In the economy of the United States. the predominant part of businesses are in the private sector. Briefly, what impact does this have on your future and choice of life style. Be specific—what is the impact on ou? . n 3 I. ‘4‘ Q. ’ t . DE, pr 1 a, '1 due [1 on Pd «(the Camps-«.15 {of m5 2. The profit-l erage 'clout' of purchasing means that: a. A good buyer can exert a good deal of leverage on a vendor. A dollar saved in purchasing has an effect on profits that is substantially greater than an equal extra dollar of sales. X . Combining purchases gives "clout" to the buyer. [3H AV-‘ME " . A good purchasing agent should always be able to reduce prices paid by at least ten percent. 3. Pacific Pride, a clothing manufacturer, made a net profit of 5% on sales last year of $30 Million. Jane Bigley, Senior Buyer, has contracted for a new fiber blend at a savings that will increase the company's profit by $60,000. How much would they have to increase sates this year to equal the same $60,000 additional profit? a. $3,000,000 - g b. $120,000 , CU X '-‘ (0' M a$1.200.ooo .; Y Q $1.5 miflion X = ”(1.2 r" . 4. Most manufacturing companies use two sources of supply: inside manufacturing and outside manufacturing. Generally speaking, the production department is responsible for inside manufacturing while the purchasing department is responsible for outside manufacturing. @ALSE ,rr» 5. An organization can be competitive over the long-term onm if it can: a. Hold down direct labor costs. b. Determine market trends long before its competition. [:c. Deliver products customers want. x d. Keep material costs below 25% of the sales dollar price. 900 all of the above. 6. In selecting personneffor the Purchasing Department, it is n_ot normally necessary to be concerned about the abil' the prospective buyer to get along with other people. TFIU ALSE 2. 7. Which of the following is NOT an activity normally found in most purchasing departments: a. Managing the department to be most effective. X b. Research into purchased commodities. Expediting overdue orders. eviewing Bills of Materials to determine needed parts for customer orders. nalyzing bids from vendors. 8. What does the PURCHASING BILL OF RIGHTS mean by stating "BUY THE RIGHT QUALITY“? Give an example to illustrate. . \ m. luu_ .1.‘ ‘ .3 0 , (1:80. (All AL; r . I. L . nits amma If: a. "II-..'. on c- c ' 'r'u A aflShoggwIllhD’CR up longer Unan 6hr; é‘ifv and almost/as long as the 3870 r1952, 9. Arrange the following in order as they appear in the Purchase Cycle. Ll Purchase Order — Bill of Materials _ E Customer Order -r 9&1!th Ms W! Cub bomd i __:)_ Receiving Inspection Purchase Request 10. The document which contains all of the needed parts and quantities to build a specific product is called: a. Dealer invoice. b. Purchase Request 0. Vicks-Holden Matrix (g) Bill of Materials e. Purchasing Bill of Rights 11. The most fundamental of all purchasing objectives is to support company operations with an III errupted flow of materials and services. @I FALSE es have a responsibility to earn 17 profit for their owners, their employees and their community. 7. 1. w‘: 7 M0 13. Purchasing is said to be centralized when: 3. Purchasing people are all located in one office. @ A single person or department :5 responsible for the entire purchasing function. 0. Top management performs the major functions of purchasing. d. All of a company’s purchasing is done at its corporate headquarters. .._-—-""' 14. In a well-run organization, the purchasing department has both the responsibility and authority to request the user department to reconsider the specifications of quuisitioned if, in the opinion of the buyer, the interest of the company can be better served. @FALSE 7‘ 3. 15. Which of the following is NOT a valid reasonfor adopting the concept of CENTRALIZED PURCHASING in a business organization? a. Improves control over purchasing commitments. b. Places responsibility and authority in a single department. Can achieve long-term improvements in vendor relations & performance. mmedlately speeds up delivery of overdue items. / e. Results in more efficient use of employees. 16. In making a purchase, is there one requirement (PRICE, QUALITY. AVAILABILITY) that must c-nsistently. ave priority over all others? @NQ. EXPLAIN your answer briefly. i 2 h ' a? lfl/‘é fl-f/f/Izl need {76) balaqt'fili ,« 57/0,)“,fiwv M r4 . 17. Which of the following is NOT considered to be a prerogative of tZ:buyer? ontrol contacts with vendors. “elect the required delivery date. G. Select the vendor to be used. d. Choose the appropriate pricing method. 9. Determine the price and terms of the agreement. 18. Despite what some idealistic purchasing writers say, a vendor’s perceptions about a buying firm are not particularly important for developing good long-term relations and improving its competitive position so ion , efirm's businessi ' ble to the vendor. THU )prefira 19. Specific purchasing procedures employed by a firm to reduce the workloads imposed by small and repetitive purchases might include: Blanket Purchase orders . Vicks-Holden Matrix c. Improved Bills of Material /"""' d. Conversion to Centralized Purchasing. e. Three-way verification of invoices. organizati- a. . 4. 21. The concept of FUNCTION is important for determining quality required in a product. The CALPOLY _ Foundation is planning to purchase several EXERCISE BICYCLES for the campus recreation facility. State the function and some qualitative requirements for; these exercise bicycles. / ' O .ru 9 n! 5 '..e' lb..l_l AJ.’ é: m} 60me 22. If a vend fails to perform properly to a contract and delivers the materials after the required delivery date. the buyer company has the right to a. Accept part of the material and reject part. b. Accept all of the material. c. Reject all of the material. / Any of the above actions. 23. A supplier who, under the terms of a valid written contract, delivers material that fails to conform to a warranty previously given orally by the supplier’s sales representative but which is not included in the written contract, may successfully defend against prosecution for failure to perform the contract because: a. A sales representative is not an authorized agent for the supplier. A written contract supersedes all previous oral contracts. J 0. Warranties must be written down. d. None of the above. CASE: THE OLD OAK FURNITURE COMPANY (Eight Points) Read the case “The Old Oak Furniture Company'. You may assume that Petula Petrie has correctly evaluated the vendors involved for price, quality. availability, relabiiity. and long-term growth and awarded the contract to the competitor of USA only after being sure of her facts. Answer the two questions below: 24. List three objectives of the Purchasing Department that are particularly applicable in this case and rasons for your seiection. '34 I. o. a" an. .‘ ’J ', t I A 1* 010. it! bd gulf/(AXIS 5. 25. What should Petuia include in her reply to Silas Miio’s questions? Be 5 ecific— address both the reasons for her choice and how good relations might be maintained with USA.) (Continue 24 or 25 on reverse if needed) End of Exam “Now I am asked only to bid on a specific quantity by a set date, and any remarks by me as to quantity. quality, or delivery are not accepted. I have tried to talk with these kids now in pur- Lhat we do not have a policy on evaluating our vendors, particularly where intangibles like mxwkx} a EKKWEQ Kggiigoc 02%;“: a wé{ .. '\., . -lg'iL H /z_. -: 82. MANAGEMENT 206 — {Wit/Ir“ NI? - PRINCIPLES OF PURCHASING m Part I: (Four points per Question) 1. A good supplier (pick the best characteristic) a. Makes sure that every purchaser gets treated equally. b. Ensures that invoices are not sent out before the purchaser receives the materials. / c. Will remember the buyer’s birthday. 6 is concerned about the purchaser’s needs beyond satisfying the current contract. 2. Stability in purchaser-supplier relations: a. Is generally unimportant b. Requires that the purchaser is substantially larger than the seller in any“ volume. ls dependent on the perceptions that each party has of the other. d. Requires that the supplier consistently provide the buyer lower prices than it provides to the buyer's competitors. 3. A buyer shouid alwa 3 try to find an efficient sole supplier to use rather WEI-multiple sources. TRU‘L 5. Which of the following is NOT a valid reason for selecting a SOLE SOURCE for a product? a. A significant quantity discount is available from the supplier. b. The supplier owns a patent on the needed product. Q2) The objective of the purchase is to improve suwmy. d. The order size is small and probably will not be repeated. The purchasing organization takes the initiative in locating a supplier. 6 The purchaser has a number of high—qualified suppliers to choose from. JIY c. The order size is small and probably will not be repeated. 3: Supplier development is a supplier selection process in which: d An existing supplier agrees to buy a purchaser's product in return for the promise of a greater volume of sales to the purchaser’s company. 2. 7. Two acceptable ways in which a purchaser can significantly reward a supplier for providing on-time delivery, high quality and reasonable prices in a stable buyer-purchaser environment would include: a. Use of the buyer’s ski lodge and hunting retreat for the seller's top managers. b. Assurance of future business in the form of a long-term contract. 0. Recommendations to other companies of seller’s company. d. Adding incentive gift payments to the seller's invoice when paying bills. l. a, b & c only. il. b, c & d only III. a &. d only. / @b & c only. V. All of the above. a. In order tor competitive bidding to be used, list fiv_e conditions that must be present: 0 WWW {here mgzfi ix: mags? 521mg WWW We: hag fig be. EQQgASE/Jtyimg 5 9. Which of the following would most likely require negotiation rather than competitive bidding. a. Purchase of a brand name freezer from a local company. b. Purchase of items for which there are several strongly competitive vendors. c. Purchase of occasional hand tools from a local hardware store. @Purchase of a limited number of non-standard, expensive steel part-We machine shop. 10. A sporting goods manufacturer has just located a new plant in this county. He needs a supplier for specialized cartons and packing materials that are very expensive to ship from his old source out-of-state but which are not available at any vendors in the area. A technique that the purchasing manager can use to obtain these materials locally would be: Supplier development. _ . Vicks-Holden Matrix / c. Market-value pricing. d. Multiple sourcing. 11. Despite the fact that there is no legal requirement compelling the buyer to give an order to the low bidder. the competitive by? process itself implies that the low price bidder will be ( “he order if all other factors ity, service. availability. reliability, etc.) are equal. FALSE 3. . The ' ' of government purchasing as compared to purchasing in the private sector: aAre v ua Identical and require only minor procedural differences to implement. . Are much different because of the complexities of public law. ‘ I Q Require a much different apgrgach to the competitive bidding process. OM’Y ) I ’9'?!" 9 I d. Place emphasis on supporting local businesses rather than cost saving. ,1 g r , I. M.) O 13. In public purchasing, normally all information on prices submitt- - .- n . ors and the price finally paid must be made available to any taxpayer requesting it. @-‘ 14. It is inappropriate to use competitive bidding when: 7 a. Price is important. / it is impossible to estimate costs with a high degree of certainty. . Highly standardized products are involved. d. The material is not required until a date 180 days in the future. / Eider conditions of pure competition, supply and demand alone determine price. “III!!!” FALSE 16. Variable Mar in ricin is ’A pricing method that aims to generate a suitable profit on a firm’s entire product line rather t an each product in the line. /‘ b. A range of prices on a given product wherein the quantity ordered determines the price. c. A preferred method of pricing for high-tech, highly customized products. d. Very similar to the Vicks-Holden Matrix method of pricing products. 17. The pest example of a Variable Cost in the following is: a. The salary paid to a Burger King Manager on an annual basis. b. The amount of dishwashing soap used in a busy Burger King restaurant on a dwsjs. @The number of hamburger buns used at a Burger King on any particular day. d. The lease payments on the dishwasher machine at Burger King. 18. in determining the cost to manufacture a specific machined part, the Cost Accounting Department would need to establish the number of labor hours used in the product‘s drilling operation. This would be an example of which kind of Traceable Cost: a. Variable Cost 3 Direct Cost “V ’ . Overhead Cost \/ .Semi-Variable Cost 19. The Value A - sis technique is a method of improving a product by evaluating its function versus its cost. m: FALSE 20. All of the following are valid objectives of the Negotiating process except: .liaximizing profits at the vendor’s expense. / b. Ensuring on-tirne performance of the contract. 0. Setting the foundations for a long-term working relationship. d. Having control of the vendor’s performance to the contract specifications. 21. The m important step in ensuring successful negotiations for your company is Q ace-to-face negotiations. . Price analysis ‘9 Proper planning & rehearsal o. Selecting the correct location for negotiating. Part Two: (8 Points Per Question) 23. Flead Case "COLLIER COMPANY l" on pp. 728 - 730. Analyze the Purchasing Manager’s handling of the Competitive Bids. in your opinion. what mistakes (if any) did he make and what could he have done better? Be SPECIFIC!!! ,0 HR ‘] d3fln®f E E a fizzle big fifc e Ifimakfi 53mg fig Va ‘3? “2.53 m gm: be m. £52 (meal; bldlbgamgc m, k .. in. ’ A l t ' ’11.“. 6 '__‘L’ ---’-_l.i_‘_-.’ CLSO r I . 4 ‘ . . . . ’yydx “I" I 1‘ A, ‘ -’L" :1 A4! L _" 4'0 A I, A. '44, ' '4'! ‘ b- I “" 'LI'AJA ' ‘1‘! £1, ‘8 IJ'A'L A’4 .‘ A A, ’A’ £15.: £44.... ’ . In“. .71., n ‘9 out. a ’1’ ' o ' . in!!! _t IL '1 Al. ' A I m I ‘.Ar_ 42. ”K9. .’ 0 - . ‘t .. , . t i l . “Jr” Ago I... I. - 4r I .0.“ U; '1 I CG» i‘ r - . q'gfl A W: 1. I! I6 '11 l“ o hljx \ o o i ,u E .OF I m ‘ m at . s ‘ .. V \ . J I I ' r F {5 I ’ O I Q " -- '. All. A 1“. u.;.' I I f €11 . V '4 continue on reverse if needed) . ( ’U’hfiK it? MS dang h]! D W i ‘ l amuse, L can been an winner ”Ed ‘ if"? d “Mfg, (1/6 (1in 5 $39M} 5 when bujrrtc § is 05 . WWW”: 24. Read the case FOLAN CITY attached. Answer questions a & b on the worksheet. In order to satisfy Bill Marsden, Andrea Sparton has scheduled a meeting with Marsden next Wednesday morning. To prepare for the meeting, she has had the city engineering department review its findings of inferior on the model proposed by Marsden Inc. and had the chairperson of the city finance committee review the committee recommendations. Both have completed their reviews, found no reason to change their opinions and have agreed with Andrea's actions in awarding the compressor contract to the other firm. a. Andrea is now preparing to reach a negotiated agreement with Marsden which will satisfy him but without changing the award of the compressor contract to the other company. In preparation for the Wednesday meeting, complete the attached worksheet listing Andrea's interests. her estimate of Marsden’s interests, at least one possible option for agreement, one acceptable standard available (if any), and both her and Marsden’s BATNA (Best Alternative To A Negotiated Settlement). b. What Results Desired for Andrea will make her happy, are acceptable, and are iiveable? Outiine a possible Preposal she might use to achieve a satisfactory agreement. End Jennifer Wolfgan' NEGOTIATION PREPARATION WORKSHEET INTERESTS + MINE THEIRS W" V I" 1.(‘95fi=-Q:5wc,slne%opiiof Sb /1._IQM£&_CQQJIZQL ’J) I'VZMLMLLWnMS 2.‘ " q I; ‘ SIWAW‘ 1 3-Wme as jolmfion ”W? and)? P0 POSSIBLE OPTIONS. 1. " Cr 1. 5 0m} ' gm’fihclplocal @9599: 22%“ 2. , WW) *1 31132: bath " ““14 3mm Mac, neither 5 Iv} BATNA: (Best Alternative To A Negotiated Agreement) “1""; ‘07" 2-1 I F ”I mwf ’ 50m; Theirs WW; 1’30 -l )( . RESULTS: What Results Will Make Me Happy? / . n 1501/41/13de 019%th What file Belts Will Be Acceptable? “ ‘ WWW mwgqf it What Results Can I Live With? (Better Than My BATNA?) ’L I." A! IAWII' 0.1.2. A I ‘I ll bg‘W-Idéé . MY PROPOSAL TO REACH A SATISFACTORY AGREEMEN. 6.11;».MI I. A an :40 A: at Ina ‘. 1. b0 ‘ _. III’ 9- :./ . it A; y if- # '4] A r ”{' I n nu. a‘ If M ex A. 7 in plant/10L maq mam {fie/(1635910 l hlfll . 3.7“?“ his M aduffhig WK :5 Egg/f an tom/o 5h 6 (1e pm (In in 3M3 hm {at r& worth 1r common military Case 13—1 :ary purchasing, can t changes should be i? I. purchase specifica— chasing? Justify the mg for a health care: aanges would be re-,_’ ion of School Busin 9012. 4th ed. New Yorj 'ials Management: 'aterials Manageme :I- 1135. Washington, DJ: ‘3: Recommended gust 1980. " ishing'bon, D.C.: ' A :t Handbook for S ciation of School _ ent. Lexington V ithersburg, M 2nd ed. Gait]! ...
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