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ISM 630-007 Exam -

Free 630-007 Sample Questions:

1. What does the payment term "2% 10/net 30" mean?
A. 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.
B. 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.
C. 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.
D. 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.
Answer: D

2. Early supplier involvement (ESI) is advantageous PRIMARILY for which of the following reasons?
A. It requires supplier input into product reconfiguration.
B. It reduces the need for new technology.
C. It ensures lower prices.
D. It promotes higher quality.
Answer: D

3. A technique for reducing financial risk when purchasing globally is to use
A. currency contracts
B. global market analysis
C. inventory stockpiling
D. offshore offices
Answer: A

4. Buyer Smith receives a requisition from XYZ, Inc.'s accounting department for a new photocopier. The current equipment needs immediate replacement, but has a residual value of $600. XYZ has instituted a freeze on capital spending for all non-manufacturing related equipment. Smith calls a local distributor, who offers to lease XYZ 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 XYZ $450 for its current equipment. Given this information, which of the following is the BEST course of action for Smith to take?
A. Sign a third-party lease through a bank, based on 100,000 copies per month
B. Sign an operating lease through the distributor for payments of $.015 per copy, based on 100,000 copies per month
C. Purchase the equipment at a cost of $16,000, minus a trade-in of $1,200
D. Sign a capital lease, based on 100,000 copies per month
Answer: B

5. Which of the following refers to the practice of identifying a selling price and subsequently working with a supplier to arrive at an approximate cost for achieving profitable sales?
A. Long-term agreements with flexible increase and decrease in cost
B. Price base costing for the target price
C. A supplier-coordinated cost reduction program
D. A reduced learning curve
Answer: B

6. Which of the following terms refers to material that is no longer needed due to changes in the reason for its acquisition?
A. Excess
B. Obsolete
C. Scrap
D. Surplus
Answer: B

7. In determining the most effective financing method for a piece of capital equipment that has a lead time of more than 12 months, the buyer should consider all of the following EXCEPT
A. depreciation
B. supplier financing
C. interest rates
D. cash flow
Answer: A

8. The use of early supplier involvement is likely to result in all of the following benefits EXCEPT:
A. A reduction in cycle time from product design to production
B. The ability to consider all supplier ideas equally
C. The ability to consider cost and design options
D. The consideration of supplier ideas prior to the finalization of specifications
Answer: B

9. Which of the following factors will contribute the MOST to reducing a new product's time to market?
A. Ease with which a firm can manufacture an item
B. Component availability and economy at the time a firm needs an item
C. Use of a single engineer rather than a design team approach
D. Technical support suppliers provide in the early stages of design
Answer: D

10. Valuation of inventory may be done using all of the following EXCEPT
C. the ABC concept
D. lower of cost or market
Answer: C

11. A purchaser is negotiating a contract for which production and delivery will be stretched out over a 24-month period. If the purchaser wants to get the best price, the purchaser should include in the contract a provision to
A. accept all material produced under the contract
B. cover changes in rates for material and labor
C. cover unforeseen production delays
D. eliminate penalties for late deliveries
Answer: B

12. Economic forecasts can be obtained from all of the following EXCEPT the
A. ISM Report On Business®
B. Department of Commerce
C. Bureau of Labor Statistics
D. Thomas Register
Answer: D

13. From a management point of view, what are the two basic categories of costs associated with inventories?
A. Obsolescence and deterioration costs
B. Storage and incremental costs
C. Supplies and services costs
D. Carrying costs and acquisition costs
Answer: D

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

15. In the health care sector, the PRIMARY motivation to outsource is to
A. reduce technological risk
B. reduce labor costs
C. implement JIT
D. shift patient liability
Answer: B

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

17. Of the following, which 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

18. The timing of purchases is MOST important when a market has
A. unstable supply with predictable prices
B. reasonably stable supply with substantial fluctuation in prices
C. price and supply instability
D. price and supply stability
Answer: C

19. The MOST common reason for a public or nonprofit corporation to use lease/purchase agreements to obtain equipment is to
A. avoid capital expenditures
B. gain depreciation advantages
C. gain tax advantages
D. reduce maintenance needs
Answer: A

20. The "make-or-buy" decision is MOST appropriately characterized as a decision that should be made by which of the following?
A. Production management
B. Purchasing management
C. Engineering management
D. General management
Answer: D

21. A full-service lease requires which of the following?
A. That the lessee properly maintain the asset
B. That the lease be a long-term arrangement
C. That the asset be technical equipment
D. That the lessor pay for maintenance, property taxes, and insurance
Answer: D

22. An auto manufacturer acquires 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 auto manufacturer?
A. Outsourcing
B. Vertical integration
C. Privatization
D. Ownership interest
Answer: B

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

24. Which of the following BEST describes the distinction between evaluation of a product and value analysis?
A. Value analysis is more concerned with "make-or-buy" issues.
B. Value analysis focuses more on economy and efficiency.
C. Evaluation of a product is more concerned with cost issues.
D. Value analysis is more concerned with product liability.
Answer: B

25. A purchasing manager would generally use a third-party lease as a financing instrument when doing which of the following?
A. Purchasing equipment from the manufacturer with someone else's money
B. Arranging an assignment agreement with a bank
C. Transferring the asset to the internal customer
D. Acquiring equipment from one party and maintenance from another
Answer: A

26. A steel producer stops making and begins buying steel slabs for use in producing finished products in its own facilities. This practice is known as
A. outsourcing
B. reciprocity
C. integration
D. pool buying
Answer: A

27. A project or process targeted for improvement should meet all of the following criteria EXCEPT:
A. It is relevant to a key product or service issue.
B. It is in the process of change.
C. It is likely to contribute to organizational goals.
D. It is within the control or influence of the team.
Answer: B

28. The prices of platinum and silver are generally established at the time these commodities are
A. mined
B. refined
C. shipped to the buyer
D. received by the buyer
Answer: C

29. In the public sector, which of the following financing alternatives would be MOST applicable to the acquisition of real property or buildings?
A. Supplier
B. Bond
C. Bank
D. Currency
Answer: B

30. Which of the following factors is LEAST likely to influence a "make-or-buy" decision?
A. Skilled personnel at the buying firm
B. Transportation costs
C. Market value of the product
D. Production demands
Answer: C

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