L2M2 Procurement and Supply

Operations Mock Examination

Date 5 January 2021

Time Start: 09.30 End: 11.30 Duration: 120 minutes

Name:

Total marks: 100

 1. Which one of the following statements is INCORRECT?
A. Organizations in the public sector are owned by the government on behalf of the
state
B. The primary purpose of Botswana Unified Revenue Services is achievement of a
commercial profit
C. Competition is a key factor for private sector organizations
D. The activities of a public sector are financed by the government and/or by revenues
that it earns from customers
2. In which of the following respects are key issues for procurement in the public sector
different from those in the private sector organizations?
1) Sustainability
2) Customer service improvement
3) Reducing cost inefficiencies
A. Key issues differ with regard to (1) only
B. Key issues differ with regards to (2) only
C. Key issues differ with regards to (3) only
D. None. They are key issues for both public and private sectors

3. Quantified and time-assigned targets for achieving the goals of an organisation are known
as:
A. mission
B. strategies
C. objectives
D. tactics
4. In a company that manufacture advanced technical equipment, procurement staff report to
the head of procurement, but also take instructions from project manager on matters
relating to specific major supply contracts. This form of organizational arrangement is called.
A. product organisation
B. matrix organisation
C. centralised organisation
D. Customer organisation
5. Which one of the following activities is the responsibility of Human Resource Management
(or Personnel) function within an organisation?
A. Training and development of staff
B. Providing IT support services to the rest of the organisation
C. Preparing the monthly payroll and making payments to employees
D. Dealing with customer complaints
6. Which of the following is NOT a feature of spot buying?
A. The buyer does not commit to repeat purchase in the future
B. The buyer may be taking advantage of slow purchase price in the current market
C. The buyer must pay for the purchase with the order
D. D Procurement costs for the order are low
7. In reply to a request for quotation, a supplier of window cleaning services has quoted a fixed
price per job for cleaning the windows of the buying organization’s head office building and
the price and the terms and conditions will remain unchanged for the next 12 months and
will apply to all window cleaning jobs undertaken that time. The quotation provided by the
window cleaning company is known as:
A. a blanket order
B. a standing offer
C. a call-off
D. a series of acceptances
8. Which one of the following statements about a framework agreement is correct?
A. A framework agreement is a legal contract that requires the buyer to make one or
more purchases during the term of the contract
B. A framework agreement is not a legal contract, but requires the buyer to make
one or more purchases during the term of the contract
C. A framework agreement is a legal contract, but does not require the buyer to make
one or more purchases during the term of the contract
D. A framework agreement is not a legal contract and does not require the buyer to
make any purchases during the term of the contract.
9. Which of the following statements is correct?
A. A call- off order under a framework agreement cannot be put to mini-competition
B. The purchase price under a framework agreement must be fixed for the full term
of the agreement
C. A framework agreement may be with just one supplier or with several suppliers
at the same time for the same product or service
D. Each purchase contract under a framework agreement must have exactly the same
terms and conditions
10. Which of the following is the starting point of the target costing process?
A. The supplier calculates the production cost that must be achieved in order to
provide a reasonable profit
B. The supplier adds a profit margin to the cost of a product
C. The supplier estimates the maximum selling price that the market will de willing to
pay for a product
D. The buyer determines the maximum price he is willing to pay
11. Which one of the following pricing arrangements represent a low financial risk to the buyer?
A. Predetermined fixed price with adjustment clauses
B. Price based on target cost, with a supplier incentive
C. Fixed price
D. Cost plus a fixed percentage
12. A risk and reward arrangement between buyer and seller in a contract is an arrangement
whereby:
A. the contract price is adjusted for increases in one or more cost indices
B. the contract has a fixed price, but the price is subject to review at the end of specified
period
C. the contract has a fixed price but includes bonus payment incentives to the supplier
D. the contract has a fixed price that includes an allowance for cost increases
13. Which one of the following is a disadvantage of model form contracts?
A. They involve ‘reinventing the wheel’
B. They increase the time and costs of contract development
C. They are usually unfair to one or other of the parties
D. Legal advice is still required if significant amendments or variations are to be made
14. Which of the following statements is correct?
A. In the case of a tender bid, the buyer makes an offer that the supplier accepts and
in the case of an auction bid, the supplier makes an offer that the buyer accepts
B. In the case of a tender bid, the supplier makes an offer that the buyer accepts and
in the case of an auction bid, the buyer makes an offer that the supplier accepts
C. In the case of both a tender bid and an auction bid, the buyer makes an offer
that the supplier accepts
D. In the case of both a tender bid and an auction bid, the supplier makes an offer
that the buyer accepts
15. What term is used for clear quantitative statements in a procurement contract which define
desired supplier performance and against which actual supplier performance can be
measured?
A. Key performance indicators
B. Critical success factors
C. Performance specifications
D. SMART objectives
16. In which one of the following ways might the internet be used to help buying staff source
the market
A. Checking inventory in real time and issuing purchase requisition
B. Analysing purchasing trends
C. Producing contract specifications
D. Obtaining suppliers’ e-catalogues
17. Which of the following is NOT usually a result of using the internet for procurement
activities?
A. Wider choice of suppliers
B. Placing orders online
C. Higher sourcing costs
D. Lower inventory and more efficient stock turnover
18. Which of the following is a tool for finding appropriate websites?
A. supplier portal
B. Extranet
C. A search engine
D. Intranet
19. For which one of the following reasons is it advisable to assess the financial position of a
supplier?
A. To decide acceptable credit terms
B. To decide prices that should be paid
C. To appraise suppliers for inclusion in a pre-approval list
D. To identify weaknesses in the supplier’s supply chain
20. When a buying organization is seeking financial information about a small or medium -sized
supplier, which one of the following is best source of information?
A. Debt collection agency
B. Supplier’s trade association
C. Credit rating agency
D. Market research company
21. Which one of the following is an indicator of possible financial instability in a supplier?
A. A high level of liquid assets
B. A high level of financial gearing
C. A high level of turnover
D. A high level of gross profit
22. Which of the following terms represents payments made for daily activities?
A. Current liabilities
B. Long -term liabilities
C. Capital expenditure
D. Revenue expenditure
23. By what means does a supplier inform a buyer that it is able to fulfil a purchase order?
A. Order acknowledgement
B. Track-and -trace system
C. Purchase order
D. Advice note
24. Which of the following terms is used for a website used by a buying organization for
registering suppliers who express an interest in supplying goods or services to the
organization?
A. A public portal
B. A partner portal
C. An enterprise portal
D. A corporate procurement portal
25. What term is used for a website, usually hosted by an independent company, that enables
buying organizations to access information about a large number of suppliers for a particular
range of goods or services?
A. Tender portal
B. Partner portal
C. Supplier database system
D. Procurement portal
26. Which of the following is the benefit of capturing data on expenditure?
A. It helps the organisation to forecast future expenditure
B. It provides the organisation with analysis of its sales revenue
C. It helps the organisation to calculate the current quantities of stock items held
D. It helps the organisation to assess the value of individual customers
27. Money owed to suppliers would be classified on the balance sheet as:
A. Revenue
B. Long-term liability
C. Intangible fixed asset
D. Current liability
28. Statement of assets and liabilities at a point in time is a financial statement known as a:
A. Cashflow statement
B. Profit and loss account
C. Annual budget
D. Balance sheet
29. Which one of the following details is NOT usually required on purchase requisition?
A. Name and address of supplier
B. Date by which goods are required
C. Quantity of goods required
D. Name of person raising the requisition
30. When a user department identifies a need for goods, the department will usually submit a
requisition to which one of the following?
A. The manager of the user department
B. The procurement department
C. The stores department
D. The selected supplier
31. Which one of the following is INCORRECT about fixed price contract?
A. The contract is preferable in a relatively stable environment
B. The price is agreed between the buyer and supplier
C. The price is not subject to change once the contract is signed
D. The price can be subsequently adjusted once the contract is made
32. Which one of the following statements, about a lump sum contract for the construction of a
building, is INCORRECT?
A. The supplier bears most of the risk of cost increases not covered by price
adjustment clause
B. The supplier has an incentive to complete the contract efficiently and on time
C. The buyer will be less concerned with monitoring cost performance than with a
cost-plus contract
D. The buyer is free from most risk under terms of the contract
33. In which of the following circumstances is it unethical for a buyer to send a request for
quotation (RFQ) to a supplier?
1) When the buyer has no intention for accepting the supplier’s quotation
2) When the buyer has already selected the preferred supplier
3) When it is intended to motivate a preferred supplier to reduce its prices
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

34. Which one of the following statements about a conformance specification is correct?
A. The supplier details exactly what the supplied product or part will consist of
B. The buyer details exactly what the supplied product or part should consist of
C. The supplier details exactly what the supplied product or part will be able to do
D. The buyer details exactly what the supplied product or part should be able to do
35. Which one of the following circumstances is referred to as ‘restricted open tender’?
A. The buyer places an advertisement in a technical journal inviting tenders from any
supplier
B. The buyer invites suppliers to tender for one of several available contracts
C. A invitation to tender is sent to a shortlist of pre-qualified suppliers
D. Requests for quotation are sent to suppliers who have not been used in the past
36. What is the significance of a credit rating score?
A. It assures the buying organisation that the supplier will always deliver on time
B. It is evidence that the business has no debts
C. It indicates the potential risk of poor payment
D. It assures the organisation of good working relationship with the supplier
37. Spot purchase is usually more expensive than fixed price contract
A. True
B. False
38. Which pricing arrangement represents a high financial risk to the buyer?
A. Fixed price
B. Pre-determinable fixed price plus adjustment clauses
C. Target cost incentive with maximum price
D. Cost price plus fixed percentage
39. Which pricing arrangement represents a high product or service risk to the buyer?
A. Target cost incentive with no maximum price
B. Cost price plus fixed percentage
C. Fixed price
D. Target cost incentive with maximum price
40. Which statement is INCORRECT about Target cost with maximum price?
A. A There is a maximum or ceiling price to the contract.
B. B Any excess costs, over and above the maximum price, are borne by the supplier
C. Any savings, below the target cost, are shared on an agreed percentage basis,
between the supplier and buyer
D. Any excess costs, over and above the maximum price are shared in agreed proportions
41. Which of the following statements is INCORRECT about Target cost without maximum price?
A. There is no price ceiling to protect the buyer
B. Any excess costs, over and above the target price, are borne by the supplier
C. Any savings, below the target cost, are shared on an agreed percentage basis,
between the supplier and buyer
D. A target price is determined on the basis of target cost
42. Supplier evaluation involves checking whether the supplier is able to cope with the order, in
terms of machinery, time and resources, which factor among the following is considered in
order to determine that?
A. Financial stability
B. Location
C. Reputation
D. Capacity
43. Which one of the following is NOT part of Carter’s 10 Cs.
A. Clean
B. Co-operation
C. Commitment
D. Consistency
44. Which of the following factors can cause supplier failure?
A. Availability of key resource
B. A new supplier entering the market
C. The end customer goes into liquidation
D. Oversupply of raw-material

45. Differentiation is caused by -----------------

A. Organisational contraction and closure of departments
B. Expansion and growth
C. Training and development
D. Research and marketing
46. Which statement is true about Henry Herzberg’s Hygiene factors?
A. They are motivators
B. Their presence is vital for employee motivation
C. Their absence can lead to demotivation while their presence has no effect on
motivation
D. Their absence has no effect on motivation
47. Which one of the following is an example of a hybrid organisation structure
A. The organisation consists of a holding company with a number of operating
subsidiary companies
B. There is both a formal and an informal organisation
C. Ownership of the organisation is shared between the government and private
sector investors.
D. The Procurement function is a centralised department at Head office but
sales and marketing activities are organised on a decentralised regional basis
48. In developing objectives and strategies, it is important to ensure that plans of every unit
within the organisation are co-ordinated, so that the units work effectively together. This is
known as:
A. strategic planning
B. vertical alignment
C. tactical planning
D. horizontal alignment
49. At which stage of Tuckman’s four stages of team development do members share ideas and
goals?
A. Performing
B. Norming
C. Storming
D. Forming
50. Identify three elements which must be present for contract to be valid.
A. Intention, contemplation, agreement
B. Intention, consideration, agreement
C. Interrogation, consideration, agreement
D. Interrogation, contemplation, agreement
51. MRP system is an electronic used to plan production which includes scheduling orders,
monitoring inventory and managing the production process. MRP stands for Material
Resource planning.
A. True
B. False
52. Which of the following statements is not an objective of MRP system?
A. To ensure that the parts or materials needed for manufacturing the end
products are available
B. To keep inventory as high as possible to avoid stockouts
C. To plan production, establish when to place orders and schedule deliveries
D. To keep inventory value as low as possible
53. CSR policy covers ethical behaviour, social and environmental issues, which one among the
following is an Ethical behaviour.
A. Employee wellbeing
B. Cultural and ethical diversity
C. Eco-responsibility
D. Sustainable resource management
54. A strong corporate social responsibility aims to boost buy-in from stakeholders and helps to
ensure the organisation is seen in a negative light, one with which other businesses will want
to build short-term relationships.
A. True
B. False
55. Which statement is correct about Cost-reimbursable or cost-plus pricing arrangements?
A. The supplier is likely to suffer a loss
B. The client knows what the final expense will be so can accurately forecast their
budget
C. The supplier can be dishonest about their cost in order to make a higher
percentage of profit
D. The supplier bears more financial risk
56. Which of the following statement represents a disadvantage of schedule of rates?
A. Schedule of rates is appropriate for strategic relationship, highly experienced
people are often given this sort of work and therefore is more expensive
B. The Client will not have a final price to use for budgeting
C. The Client has no control over how quickly the project is completed
D. The price paid is likely to be higher than if the client had opted for Fixed or
Lump-sum contract
57. Which is the major risk faced by a Buyer who enters into a Lump-sum pricing contract.
A. The payment is usually staged, so the buyer the buyer does not have to pay a
large amount of money at the end of the project.
B. The market prices rise, increasing the cost of the project.
C. The supplier runs into financial problems and fails to complete the project
D. The buyer knows exactly what they will be paying for during the whole project
58. Which one among the following represents a disadvantage of Fixed pricing arrangement?
A. A The suppliers have to commit to or hold lots of stock
B. B The stock is readily available to be called off
C. C The amount of administration required is higher
D. D It creates challenges of budgeting
59. Identify an INCORRECT statement among the following, relating to Variable pricing.
A. The buyer gets the advantage of low prices when the market drops
E. The buyer gets the advantage of low prices when the market price goes up
B. The buyer is exposed to risk
C. The Supplier is not exposed to risk
60. In which pricing arrangement does a supplier take a gamble?
A. Fixed pricing
B. Risk -and- reward-pricing
C. Cost-reimbursable or cost-plus arrangement
D. Target pricing
61. Which one among the following statements relating to Risk -and- reward pricing is
INCORRECT?
A. The supplier may make extra money if they meet or exceed their objectives
B. The buyer could pay more than in other forms of contract if the supplier
meets their targets
C. Enables suppliers to clearly monitor contractual outcomes
D. The buyer pays the supplier if he does not achieve the objectives, for the little
benefit enjoyed from the contract
62. Which one of the following organisation structures could potentially cause stress for staff
‘caught ‘ between conflicting or competing demands?
A. Divisional
B. Geographical
C. Brand
D. Matrix
63. Identify the correct characteristic of a service among the following.
A. Little customer contact
B. Standard customer contact
C. Short lead times
D. Capital intensive
64. In which type of organisation may it be difficult to get finance for the business.
A. Partnership
B. Sole trader
C. Limited Company
D. Public Sector
65. What is the similarity between a Private and Public limited organisation?
A. They are both public sector organisation
B. They are both listed on stock exchange
C. Incorporation
D. Shares are only sold to friends and family members
66. In which type of business is sharing or negotiation of decision-making a disadvantage?
A. Partnership
B. Sole trader
C. Limited Company
D. Public Sector
67. A what’s up group for CIPS Level 2 is an example of------------.
A. Formal organisation
B. Flat structure
C. Informal organisation
D. Tall structure
68. Which one among the following is the correct definition of direct costs?
A. Costs not directly traceable to the product or service
B. Costs directly attributable to the product or service
 C. Costs not required to be managed
D. Cost not as important as indirect costs
69. A counter-offer is one way of terminating an offer.
A. True
B. False
70. In battle of forms the one who fires the last shot wins the battle. What does this statement
mean?
A. The first document sent containing terms and conditions is the one by which the
contract will be legally bound
B. The buyer sends the purchase order first so is always the winner
C. The seller wins if s/he sends an order acknowledgement
D. The last document sent containing terms and conditions is the one by which the
contract will be legally bound
71. Which two components make up an agreement?
A. Offer and order
B. Offer and refund
C. Offer and acceptance
D. Offer and consideration
72. Why is a high level of interaction required between the procurement and marketing
functions of the organisation?
A. Most of marketing is outsourced to the procurement function
B. Much of an organisation’s marketing requirements are supplied by external providers
C. The marketing and procurement functions are often combined
D. The procurement and marketing functions share common objectives
Answers:
1 B
2 D
3 C
4 B
5 A
6 C
7 B
8 D
9 C
10 C
11 C
12 C
13 D
14 B
15 A
16 D
17 C
18 C
19 C
20 C
21 B
22 D
23 A
24 D
25 C
26 A
27 D
28 D
29 A
30 C
31 D
32 D
33 D
34 B
35 A
36 C
37 B
38 D
39 C
40 D
41 B
42 D
43 B
44 C
45 B
46 C
47 D
48 D
49 C
50 B
51 B
52 B
53 C
54 B
55 C
56 B
57 C
58 A
59 B
60 B
61 D
62 D
63 C
64 B
65 C
66 A
67 C
68 B
69 A
70 D
71 C
72 B