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ISM Supply Management Core Exam Sample Questions (Q115-Q120):
NEW QUESTION # 115
A stockbroker wishes to examine the relationship between merger failures and stock prices. For 30 days, data were collected for closing stock prices each day and the number of merger failures announced that day. After reviewing the data, the stockbroker believes that merger failures affect stock market prices for more than one day. Which of the following measures would help the stockbroker incorporate that effect into the regression model?
- A. Include other independent variables, such as the number of news reports on dividend released each day
- B. Include dummy variables
- C. Introduce a variable that is collinear with number of news reports on merger failure
- D. Include lagged variables
Answer: D
NEW QUESTION # 116
Which of the following refers to a stakeholder want as opposed to a stakeholder need?
- A. Requiring thata supplierprovidedetailed specifications for review for the supplied item
- B. Requiring thata supplierprovideaccommodations for the company's representatives duringvisits
- C. Requiring thata supplierprovidethe purchased component at or below the target cost
- D. Requiring thata supplierprovidedelivery schedules that meet the requirements specified inthe contract
Answer: B
Explanation:
A stakeholder want refers to something that is desired but not essential for the completion of the task or project. In this case, requiring that a supplier provide accommodations for the company's representatives during visits is a want. It is not a core requirement for the supply of the component or service but is a preference that enhances convenience for the company's representatives.
References
* CIPS (Chartered Institute of Procurement & Supply). Differentiating Needs and Wants in Procurement.
* ISM (Institute for Supply Management). Understanding Stakeholder Requirements.
NEW QUESTION # 117
A US-based manufacturing firm receives a quoted price for an item from an offshore supplier of $.40 each (in US dollars), delivered duty paid to its US plant per Incoterms 2020 rules, in minimum quantities of 20,000 units. The buying organization uses 80,000 units per year, and the carrying cost is 25%. The item price is fixed for one year. What are the total costs of purchasing annual requirements from this supplier?
- A. $36,000
- B. $33,000
- C. $32,000
- D. $40,000
Answer: C
Explanation:
* Given Data:
* Unit price: $0.40
* Annual usage: 80,000 units
* Carrying cost: 25%
* Minimum order quantity: 20,000 units
* Total Purchase Cost:
* Unit price multiplied by annual usage: $0.40 * 80,000 = $32,000
* Additional Costs:
* As the item price is fixed and includes delivery (DDP Incoterms 2020), there are no additional duties or transportation costs.
* Carrying Cost Calculation:
* For the minimum order quantity, the carrying cost is not a factor because the question specifies a
* fixed price per unit delivered.
* Conclusion: The total cost of purchasing 80,000 units per year at $0.40 each is $32,000.
References
* Incoterms 2020 by International Chamber of Commerce (ICC).
* Supply Chain Management: Strategy, Planning, and Operation by Sunil Chopra.
* The Handbook of Logistics and Distribution Management by Alan Rushton, Phil Croucher, and Peter Baker.
NEW QUESTION # 118
At what point in a business relationship with a supplier should discussions be held about which party has responsibility for specific costs, in the event the relationship needs to end?
- A. At no point in the relationship
- B. At any point in the relationship
- C. When the relationship needs to end
- D. In the beginning of the relationship
Answer: D
Explanation:
* Importance of Clarity: Discussions about responsibilities and costs should be held at the outset of a business relationship to ensure clarity and avoid disputes later.
* Contractual Agreements: Clear agreements on cost responsibilities, especially in the event of the relationship ending, should be documented in the initial contract.
* Prevention of Disputes: Addressing these issues early helps in preventing misunderstandings and legal disputes.
* Best Practices: It is a best practice in supply management to establish all terms and conditions, including those related to ending the relationship, during the contract negotiation phase.
References
* ISM Professional Series: Contracting and Negotiations
* CIPS Contract Management Guide
NEW QUESTION # 119
A supply manager Is evaluating bids for a new delivery van. Supplier J, which has provided similar equipment in the past, quotes a price of $50,000. Supplier K quotes a price of $52,500, but Includes an offer to buy back the van at the end of five years for $3,000. Both suppliers' bids meet specifications and delivery requirements.
At a 10% opportunity cost of capital, and with the 5-year present value of $1 at $.62, which supplier should the supply manager choose, and why?
- A. Supplier K, to save money over the van's life cycle
- B. Supplier J, as it provides the best value
- C. Supplier J, based on prior satisfactory performance
- D. Supplier K, as the firm will save $500
Answer: A
Explanation:
* Context: Evaluating bids for a delivery van with consideration of cost and potential buyback offers.
* Cost Calculation:
* Supplier J: $50,000
* Supplier K: $52,500 with a $3,000 buyback.
* Opportunity Cost: The present value (PV) factor for 5 years at 10% is 0.62.
* Supplier K's Net Cost: $52,500 - ($3,000 * 0.62) = $52,500 - $1,860 = $50,640
* Comparison: Supplier J's cost is $50,000, Supplier K's effective cost is $50,640.
* Lifecycle Savings: Supplier K offers a buyback, which provides future value and offsets initial higher cost.
* Conclusion: Over the van's life cycle, Supplier K's offer results in cost savings considering the buyback.
References
* Capital Budgeting Techniques by Brigham and Ehrhardt.
* Present Value calculations and decision-making in procurement.
NEW QUESTION # 120
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