160232_C1_P3_Nov_07
20/9/07
14:19
Page 1
International Certificate
in Purchasing and Supply
Understanding Purchasing Principles
C1
Nov07
DATE: Monday 19 November 2007
TIME: 09.30 to 12.30
DURATION: 3 hours
Instructions for Candidates:
This examination is in THREE sections.
Section A
Has TEN compulsory multiple-choice questions, worth 2 marks each.
Section B
Has SIX compulsory short-answer questions, worth 5 marks each.
Section C
Has THREE compulsory longer answer questions. Questions 17
and 18 are worth 15 marks each. Question 19 is worth 20 marks.
1. Do not open this question paper until instructed by the invigilator.
2. All answers must be written in the answer booklet provided.
3. All rough work and notes should also be written in the
answer booklet.
4. Cross out any work you do not wish to be marked.
QP - 03
160232_C1_P3_Nov_07
20/9/07
14:33
Page 2
SECTION A
Questions 1–10 are multiple choice questions. For each question, select ONE correct
answer from A to D and write it in your answer booklet. You are advised to spend
approximately 30 minutes on this section. Please write your answer clearly. If your
answer is not clear, you may be awarded no marks for it.
Q1
Which of the following is a type of contract?
A.
B.
C.
D.
Q2
Optional specification
Complete specification
Comprehensive specification
Under specification.
Which of the following is a widely quoted definition of quality?
A.
B.
C.
D.
Q4
Right price
Target cost
Main cost
Certified price.
Getting the quality of a product or service right is fundamental. Which of the
following can lead to unforeseen unnecessary cost?
(2 marks)
A.
B.
C.
D.
Q3
(2 marks)
Lasts a long time
Fitness for purpose
Low maintenance
Recyclable.
The total cost of ownership is made of the purchase price; cost of acquisition;
______________ and cost of disposal.
Which of the following is the missing cost?
A.
B.
C.
D.
Q5
(2 marks)
Cost
Cost
Cost
Cost
of
of
of
of
(2 marks)
ordering
operation
transportation
inspection.
At which of the following stages has the buyer the greatest ability to influence
cost?
(2 marks)
A. Production
B. Detailed design
C. Conceptual design
D. Testing.
2
C1/Nov07/BS
160232_C1_P3_Nov_07
Q6
20/9/07
Page 3
Value can be increased by providing which of the following?
A.
B.
C.
D.
Q7
14:19
(2 marks)
Shorter payment terms
Slower delivery
Increased functions for the same cost
Decreased functionality for the product.
Which of the following statements is a definition of a ‘service level agreement’
(SLA)?
(2 marks)
A. Agreement between the service provider and customer, quantifying the
minimum acceptable level of service to the customer
B. Agreement between the service provider and its suppliers to jointly decide on
the right materials for the defined work
C. Agreement between the service provider and customer on the prices to pay
D. Agreement between the service provider and customer on the time of service
provision.
Q8
Which of the following is a key aspect of services?
A.
B.
C.
D.
Q9
Services
Services
Services
Services
are
are
are
are
(2 marks)
tangible
intangible
dependent on machinery
covered by ISO 2766.
Which of the following defines total lead time of a product?
(2 marks)
A. The elapsed time between the supplier receiving the purchase order, and
completing the purchase order
B. The elapsed time between the product being delivered and invoice being
received by the accounts department
C. The elapsed time between identifying the need for a product, and delivery of
the product to the user
D. The elapsed time between identifying the need for a product, and issue of a
complete purchase order.
Q10 A supplier’s price is made of four elements; supplier’s material cost; supplier’s
labour cost; supplier’s profit; and______________
Which of the following is the missing element?
A.
B.
C.
D.
Supplier’s
Supplier’s
Supplier’s
Supplier’s
perceived value
cost inflation
cost of wages
overhead allocation.
TURN OVER FOR SECTION B
3
C1/Nov07/BS
(2 marks)
160232_C1_P3_Nov_07
10/7/07
13:05
Page 4
SECTION B
Questions 11–16 are short-answer questions. You are advised to spend approximately
60 minutes on this section.
Q11 List FIVE ideal characteristics of a specification.
(5 marks)
Q12 State FIVE ways in which a buyer can try to assure the quality of a purchased item.
(5 marks)
Q13 (a) Define the term ‘value’.
(3 marks)
(b) Suggest TWO ways in which value can be increased.
(2 marks)
Q14 Outline FIVE ways in which a buyer can satisfy itself that a supplier’s quoted lead
time is realistic.
(5 marks)
Q15 Suggest FIVE reasons why a supplier would offer a high price on a tender.
(5 marks)
Q16 Explain TWO ways a buyer can measure a supplier’s delivery performance.
(5 marks)
4
C1/Nov07/BS
160232_C1_P3_Nov_07
20/9/07
14:24
Page 5
SECTION C
Questions 17–19 require full answers with examples where appropriate. You are
advised to spend a minimum of half an hour on each question.
Q17 (a) Explain FIVE requirements that are essential for a contract to be formed.
(10 marks)
(b) Explain TWO difficulties which may occur if contract terms are not agreed by
both parties before contract award.
(5 marks)
Q18 (a) Suggest TWO reasons why it is important for a buyer to be seen as acting
ethically.
(4 marks)
(b) Describe FIVE examples of behaviour that would be considered unacceptable
or unethical while performing procurement tasks.
(10 marks)
(c) Provide ONE source or place where the employee can obtain advice if they are
unsure what is ethically acceptable.
(1 mark)
PLEASE TURN OVER
5
C1/Nov07/BS
160232_C1_P3_Nov_07
20/9/07
14:20
Page 6
Q19 ElectricTrans Ltd
ElectricTrans manufactures power transformers at its factory in the UK. Its products are
sold to electricity supply organisations in the UK and to oil companies in the Middle
East and North America.
A year ago, ElectricTrans was bought by SA Consolidate, a South African company that
manufactures a range of products such as transformers, switchgear and wind turbines.
It manufactures these products in five factories in South Africa, Dubai, the UK and
Malaya. Each factory has its own information system.
The President of SA Consolidate has stated that one of SA Consolidate’s aims will be
that the new enlarged company buys components to a common standard.
A senior team has been established at SA Consolidate to consider and implement the
aims of the company. You have been asked to join the team to represent the
procurement function. The senior team recognises that in order to meet the President’s
aim it needs to consider the way in which each factory buys products.
TASKS
(a)
State THREE likely causes for a lack of standardisation at SA Consolidation.
(3 marks)
(b)
Describe to the senior team FIVE features that a standard will contain. (5 marks)
(c)
Explain FOUR advantages for SA Consolidate of using standards.
(d)
Explain TWO disadvantages for SA Consolidate of including standards in its
specifications.
(4 marks)
END OF QUESTION PAPER
6
C1/Nov07/BS
(8 marks)
160232_C1_P3_Nov_07
10/7/07
13:05
Page 7
BLANK PAGE
7
C1/Nov07/BS
160232_C1_P3_Nov_07
10/7/07
13:05
Page 8