Question 1

A manufacturer is making a plan for strategic safety stock. To do so, they must analyse the probability of a stock out occurring and the cost impacts if it does. Which of the following are typical costs the manufacturer may incur in 'out of stock' event? Select TWO that apply.

Options :

A : Cost of equipment downtime

B : Costs of handling inventory

C : Costs for qualifying suppliers

D : Costs of approving the requisition

E : Extra costs for urgent transportation

Answer: A

Question 2

Toll Group has thousands of end-of-life IT assets that need to be disposed of. The senior management of Toll Group is largely concerned about sustainability in waste management, especially electronic waste. Before selecting a supplier to manage the process, the procurement team is required to assess the environmental risks regarding disposal of the assets. Risk assessment is basically based on the measurement of which factors?

1. Impact

2. Reward

3. Surveillance

4. Likelihood

Options :

A : 1 and 3 only

B : 1 and 4 only

C : 2 and 4 only

D : 2 and 3 only

Answer: B

Question 3

GAP Ltd is a retail business that wants to reduce its spending on stock. Its current procurement process is manual, repetitive and slow. The management team plans to use procure-to-pay (P2P) software to streamline the process and cut costs. What kind of cost is GAP aiming to lower?

Options :

A : Cost of stockouts

B : Acquisition costs

C : Holding costs

D : Disposal costs

Answer: B

Question 4

“A measure of the ability of an organisation to supply customers without delay” is the best definition of which of the following:

Options :

A : Safety stock

B : Re-order level

C : Key performance indicator

D : Service level

Answer: D

Question 5

A restaurant needs to buy a new freezer. The owner applies total cost of ownership model to calculate the life-time cost of the freezer. This equipment has a price tag of $1,000, the supplier can offer free delivery if the restaurant pays off immediately. Estimated electricity consumption of the freezer is $200 in 5 years. The supplier ascertains that the freezer is very durable, buyer doesn't need to care about maintenance costs. However, if the restaurant needs better protection from breakdowns, the warranty is free for the first 12 months after the purchase. This warranty package can be extended once for another 24-month period with the cost of $75. After 5 years, the buyer will be able to resell this freezer for $250. What would be the estimated total cost of ownership of this freezer if the restaurant owner buys the extended warranty package?

Options :

A : $1,525

B : $1,025

C : $1,200

D : $1,275

Answer: B

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