L4M2 Test Harvesthouse

L4M2
DEFINING
BUSINESS
NEEDS
Harvesthouse Consulting& Training South Africa Pty Ltd Web: www.harvesthouse.co.za

595 Thabo Sehume Street Email: giftmuz@harvesthouse.co.za
Signal House Building Tel: 012 753 8007
Pretoria, Gauteng, South Africa 0002 Cell: 073 209 3309, 082 079 1866, 073 277 7489
Email: enquiries@harvesthouse.co.za
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The production of electricity from nuclear energy remains on the Department of Energy (DoE)’s
agenda in line with the National Development Plan (NDP) 2030 vision which strives to ensure South
Africa is self-sufficient in electricity and energy in order to stimulate and drive economic growth. The
Nuclear Energy Corporation of South Africa (NECSA) estimates that it will cost R6billion to develop a
nuclear plant to generate electricity. A Russian firm has agreed to develop and construct the plant
in return for the sale of South African minerals (Platinum Group of Minerals – PGM) over the next
10 years.
Despite criticism from various pressure groups over the suitability of nuclear energy in light of
climate change, the DoE still believes that nuclear should be part of South Africa’s energy mix,
among other uses in medical and pharmaceutical sectors.
CHAPTER 1
1. What are the obligations created by the above procurement?

A. A cost of R6billion only
B. A liability represented by the market value of the minerals over 10 years
C. Both cost of R6billion and liability of the market value of minerals over 10 years
D. Either a cost of R6billion if Government decides to pay cash or a liability equivalent
to the market value of minerals if credit terms are used
E. There is no commitment created

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2. The need by the South African government to be self-sufficient in energy by 2030 as per NDP
2030 vision is an example of
A. Business Case
B. Corporate Goals
C. Five Rights of Procurement
D. Framework Agreement
E. Annual Planning Cycle
3. Which of the following purchases is done from an approved list of suppliers for raw
materials, coal, steel, chemicals
A. Straight rebuy
B. Modified rebuy
C. Technical rebuy
D. New purchase
4. Straight re-buy means purchasing the same item as previously:

A. from the same supplier and at the same price
B. from the same supplier but possibly at a different (agreed) price
C. possibly from a different supplier but at the same price
D. possibly from a different supplier, and possibly at a different (agreed) price.
5. From the above case study, determine what type of purchase is nuclear energy for
electricity?
A. Straight Re-buy
B. Modified Re-buy
C. New Purchase
D. Call Off
E. Capital Item
6. In developing a business case, which one of following steps should come first?
A. Compare options
B. Establish the cost
C. Assess the risks
D. Identify the needs
7. Which of the following describes target costing?

A. Is the price the buyer aims to buy the goods and services at
B. It is a process of deciding a competitive market price for a new product
C. It is system to determine how the product is worth
D. None of the above

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8. In order to ensure that the South African government considers all end-to-end costs including
positive and negative benefits of the nuclear project above, NECSA must employ the following
technique
A. Total Cost Modelling
B. Simulation Models
C. Whole Life Cycle Costing
D. Total Cost of Ownership
E. Optimisation Models
9. A change in regulation may require an Organisation to have a business case, which of the
following circumstances describes this?
A. Capital expenditure
B. MRO purchases
C. Modified rebuy
D. New purchase
10. Following the recent resignation of the former Chairperson of NECSA, the new Chairperson
would like to present the Nuclear Energy Business Case to DoE and the Parliamentary Portfolio
Committee on Energy. In order for DoE and legislators to approve the business case, the Chairperson
must ensure that the document addresses the following issues, among others:
A. Return on Investment, Cost, Quality, Delivery, Risk

B. Customer Satisfaction, Return on Investment, Time to Market, Managing Risk, Improving
Productivity
C. Productivity, delivery, budgetary constraints, managing risk, time to market, customer satisfaction
D. Whole life cycle costing, Total Acquisition Cost, Customer Satisfaction, Cost-Benefit
Analysis
E. Simulation, Decision Support Models, Optimisation Models, Issues Management, Hybrid strategies
11. Closed problems appear when something happens that should not have happened. This can be
exemplified by
A. Model form contract
B. Systems contracting
C. Call of contract
D. Buying off contract
12. After acceptance of NECSA’s business case, the South African government would like to establish
a nuclear plant for electricity generation but is not really sure of the design and technical
specifications. Advise the Government on what they must do
A. Issue an RFQ
B. Issue an RFI
C. Issue a RFP
D. Issue Invitation to Tender
E. E. Issue pre-qualification questionnaire
13. What is the name given to a straight re-buy that is based on an existing framework agreement?
A. Volume Discount
B. Call Off
C. Direct Cost
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D. Specification
E. Trigger Event
14.Which of the following might lead to a modified re-buy for a regularly purchased item?Select
TWO that apply
A. Increase in the rate of use

B. Change in product regulations
C. New product
D. Buyer dissatisfaction
E. Price adjustment clause
15. A competitive bidding process in which suppliers are invited to submit tenders for a procurement
contract is most likely to be used for:
A. a straight re-buy
B. a modified re-buy
C. a new purchase
D. renewal of an existing service agreement.
16. What does the acronym RAQSCI stand for?

A. Responsible, Accountable, Quality, Service Requirements, Cost, Innovation
B. Relevant, Attainable, Quality, Social Responsibility, Cash, Intitle
C. Regulatory, Availability, Quality, Service Level, Cost, Innovation
D. Regulatory, Availability, Quality, Service Requirements, Cost, Innovation
E. Responsible, Attainable, Quantity, Service Requirements, Cost, Innovation
17. The emerging of a monopoly in a key market is an example of which of the following
A. Major problem
B. Closed problem
C. Open ended problem
D. Incapacitated problem
18. The risk of financial instability of a supplier under the RASCI framework is described by?
A. Cost
B. Quality
C. Innovation
D. Availability
19. Reports in business magazines and business pages of the newspaper can be very informative.
What type of information is this?
A. Quantitative data
B. Qualitative data
C. Primary Data
D. Secondary research
20. A cash register in a flourist business can be regarded which of a cost

A. Fixed cost
B. Semi –variable cost
C. Direct cost
D. Indirect costs

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21. The use of a performance specification can fall under which of the RASCI acronym?
A. Innovation
B. Availability
C. Quality
D. Regulatory
22. RASCI Service requirements can be defined by which of the following?

A. Toll free number
B. Public authorities or government agencies
C. Continuous improvement
D. Capacity
23. Carbon Tax Act came into effect on 1 June 2019 in South Africa. A new software is required by
the South African Revenue Service (SARS) as the end user responsible for implementation of this
Carbon Tax. Which document must SARS issue to the Office of the Chief Procurement Officer (O-
CPO) in order to initiate the procurement of the Carbon Tax Software?
A. Purchase Order
B. Requisition
C. Invitation to Tender
D. Request for Proposal
E. Request for Quotation
24. What is the purpose of an issues map in trying to solve procurement problems?
A. To find the main causes of the problems

B. To analyse primary and secondary data obtained from interviews, questionnaires,
Observations and documented records
C. To draw arrows from the source issue to the issue that results (consequence)
D. To find the main symptoms of the problems
E. To find both the main causes and symptoms of problems by counting the number of
Arrows
25. What does the acronym SCAMPER mean in procurement problem solving?
A. Substitute, Combine, Adopt, Modify, Put to other uses, Eliminate, Reverse
B. Switch, Combine, Adapt, Modify, Put to other uses, Eliminate, Reverse
C. Substitute, Combine, Adapt, Modify, Put to other uses, Eliminate, Reverse
D. Switch, Consolidate, Adapt, Modify, Put to other uses, Eliminate, Reverse E. Substitute, Combine,
Adapt, Modify, Put to other uses, Eliminate, Replace
26, A company purchases substantial quantities of a fairly costly but non-critical item, for which
there is a competitive supply market and no shortage of supply. Which one of the following
procurement strategies would seem appropriate for this purchased item?
A. Look for a substitute item to buy

B. Establish a long-term supplier relationship
C. Prioritise price as a business need
D. Use automated procurement methods
27. What is the purpose of drawing a RACI Matrix in the process of developing a procurement
business case?
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A. To make plans to implement a chosen sourcing strategy
B. To define the process for implementing a sourcing strategy together with milestones
C. To define roles and responsibilities of human resources to be involved in the
implementation of a chosen sourcing strategy
D. To establish people who must be Responsible, Accountable, Consulted and Informed
E. To establish people who must be Responsive, Accountable, Consulted and Informed
28. How does the Porter’s Value Chain help procurement in defining costs?
A. There is no relationship between Porter’s Value Chain and Costs
B. Helps define inbound logistics, operations, outbound logistics, sales and marketing and service
C. Helps identify primary activities as the main component of direct costs and support
activities as the main portion of indirect costs
D. None of the above
29. Which of the following statements is true about costs?
i) All fixed costs are indirect costs

ii) All variable costs are direct costs
iii) Some fixed costs are direct and some variable costs are indirect costs
iv) Indirect costs are always fixed
v) Raw material costs are an example of direct cost which is also a variable cost
vi) The wages of staff working in a production line are a direct cost
vii) The salary of the HR Director for a manufacturing company are a fixed cost which is also an
indirect cost to manufacturing
A. iii) iv) v) vi)

B. ii) iii) v) vii)
C. i) v) vi) vii)
D. iii) v) vi) vii)
E. i) iii) iv) v)
30. In breakeven analysis

i) Sales revenue = R and variable cost = V. This means profit of R –V is made. This is often called
marginal profit
ii) The fixed cost = F. This means that the number of units needs to be produced is the fixed cost
divided by the marginal profits. This shall called Q
Which of the following defines breakeven point?

A. F/(R-V) = Q
B. F = Q x (R-V)
C. Q x (R+V) =R
D. Q/(R/V) = F
31, A procurement manager in XY Company has been asked to estimate the breakdown of a
supplier’s costs between direct costs and indirect costs. What might be an appropriate starting point
for performance this task?
A. Deducting the supplier’s estimated profit margin from its prices

B. Estimating the supplier’s breakeven point

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C. Gathering information about the supplier’s items direct and indirect cost
D. Analysis the direct and indirect costs of XY Company itself
32. Why is a buyer’s understanding of break-even analysis useful in dealing with suppliers?
A. Helps the buyer to know the level of fixed costs compared to marginal profit
B. Helps the buyer to know the purchase cost analysis and purchase price analysis
C. Helps the buyer to know whether the supplier is making profit or not
D. Helps the buyer to know whether the supplier’s selling price is fair beyond the break-even point
by comparing it to the variable cost
E. Helps the buyer to negotiate price discounts when dealing with suppliers
33. The need to protect the source of supply is particularly important for:
A. strategic and bottleneck items
B. strategic and non-critical items
C. bottleneck and leverage items
D. leverage and strategic items.
34, Which TWO of the following might be used to estimate a supplier’s direct material costs for a
product?
A. Product specifications
B. Factory visit
C. Supplier’s prices
D. Technical journals
E. Product sample
35. Which of the following statements are true about costs in procurement?
i) Direct and indirect costs together with fixed and variable costs are like the ingredients or
raw materials used in break-even analysis
ii) Only Break-Even Analysis and Purchase Cost Analysis (PCA) are important in decision
making
iii) Purchase Cost Analysis (PCA) is not necessary for low-input and low-value products and
services but rather price analysis should be done
iv) Rubber bands and paper clips should be subjected to the same cost analysis exercise as
earthmoving machinery in a mining company
v) There is no difference between Purchase Cost Analysis (PCA) and Should-Cost
Analysis
vi) Should-Cost Analysis is a theoretical conception of what items must cost whereas
Purchase Cost Analysis (PCA) is a conception of the real cost incurred by the company for items
bought
vii) Target Costing relies on Purchase Cost Analysis (PCA) and Quality Function
Deployment (QFD), among others
viii) Value Analysis and Value Engineering is the same exercise on different products. Value
Analysis is for existing products while value engineering is for new products.
A. i) iii) v) vi) vii)

B. ii) iii) vi) vii) viii)
C. iii) iv) v, vii, viii)
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D. ii) iii) iv) v) vi)
E. i) iii) vi) vii) viii)
36. For a manufacturing organisation, which of the following would credit direct costs?
A. Brand advertising
B Components
C. Executive cars.
D. Stationery.
37. Total cost of ownership includes Quality assurance which of the following defines QA
A. Defects detection
B. Quality control
C. Defects prevention
D. All the above
38, Which TWO of the following factors commonly undermine a business case for accepting the
lowest-priced bid in a competitive bidding process?
A. Limited number of bids

B. Doubts about business need
C. Concerns about quality
D. Unreliable cost estimates
E. Concerns about regulatory compliance
39. Blue Ocean Water sells bottled mineral water at R10 per bottle (500ml). Its Variable Costs are R7
per bottle while the rental for the premises is R30,000 per month. How many water bottles should
the company produce on a monthly basis before it starts making profit?
A. 3,000 bottles per month
B. R3 per bottle marginal profit per month
C. R12,000 bottles per month
D. 10,000 bottles per month
E. 120,000 bottles per month
40, Which one of the following is likely to be the most detailed source of data about prices and costs
in a market?
A. Government statistics
B. Industry associations
C. Research agencies
D. Online searches
41. For which of the following tasks does the procurement function have an important role in
developing a business case for procurement? Select TWO that apply.
A. Technical negotiations
B. Assessing regulatory compliance
C. Supplier selection
D.Supply risk assessment
E.Quantifying financial benefits

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42. Competitive benchmarking is typically used to make a business case for:
A. Comparing alternative procurement options
B. Making comparisons across industries
C. Eliminating a performance gap
D. Analysis competitor performance
43. Purchase cost analysis is a technique is used to analyse cost so that strategies for reducing cost
and improving supplier relationship can be developed
A. True
B. False
44. Some private sector companies do not like to participate in public sector tenders in SA as they
feel government is slow in paying them, although there are good chances of achieving healthy
margins. When mapped against the market and the account respectively, such private sector players
will be in the quadrant described as:
A. Nuisance
B. Develop
C. Leverage Focus
D. Low Impact
E. Exploit
45. The three basic groups of WLC model are as follows:
A. Monte Carlo, Histogram, Normal Distribution

B. Standard Deviation, Simulation Models, Normal Distribution
C. Histogram, Decision Support Models, Simulation Models
D. Monte Carlo, Standard Deviation, Optimisation Models
E. Optimisation Models, Decision Support Models, Simulation Models
46. Which of the following statements is true about PCA Techniques?
i) Arm’s length relationship is not suitable for ongoing purchases

ii) Strategic alliance relationships should not be established for once-off purchases
iii) Cost analysis is suitable for ongoing purchases under an arm’s length relationship where leverage
is key
iv) Total Cost of Ownership (TCO) should not be used on once-off purchases
v) Continuous improvement should be carried out on ongoing purchases of a strategic nature
vi) Total Cost Modelling of the supply chain must be done for only strategic items while leverage
items should be subjected to Total Cost Modelling
vii)In a strategic alliance that has been set up in order to procure strategic items there is no need for
open book costing
viii) There is no need of Total Cost Analysis of the supply chain for critical projects which are
once-off purchases
A. i) ii) iii)
B. ii) v) vii)
C. iii) vi) vii)
D. iv, v, viii)

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47. In South Africa, the Departments of Health, Justice and South African Revenue Service (SARS)
have all adopted queuing systems based on lean principles. This deliberate application of lean
principles and six sigma concepts is an example of:
A. Market interventions
B. Technical Interventions
C. Cost Structure Interventions
D. Work Process Interventions
E. Supplier Relationship Interventions
48, For which one of the following reasons might a procurement manager be interested in
estimating a supplier’s direct costs of regularly purchased item?
A. To monitor the supplier’s fixed and variables costs

B. To estimate the suppliers gross profit margin on the item
C. To compare the supplier’s price with those of viral suppliers
D. To monitor the quality of the supplier’s products
49. The best way to manage a budget is to do the following:

A. Accruals, Zero-based Budget, Variance Analysis
B. Internal Benchmarking, Generic Benchmarking, Competitive Benchmarking
C. Plan, Do, Review Cycle
D. Cashflow, Depreciation, Control
E. Investment, Benchmarking, Variance Analysis
50. Why would an organisation prefer to use the zero-based budget approach?
A. To save costs since expenditure is zero

B. It is simple to use as the manager simply adds an amount to the current budget to cover inflation
C. To build the budget from the ground upwards
D. To stimulate innovation and improvements by justifying the need for each and every resource
needed when it is assumed that there are no resources
E. To get management to be involved in the creation of the budget and reviewing it
51. The practice of measuring performance against a world class organisations. Can be defined by
which words. Select two answers
A. Supplier tiering
B. Optimisation
C. Benchmarking
D. Offshoring
E. Supplier performance appraisal
52. Nash Paints plan to import paint from the USA due to the unique quality. The department had a
budget of $5-00 per litre however the prices were now $7-00 per litre because of political issues
between the two countries, more than anticipated amount was paid. Which of the following
describes the situation?
A. Moonlighting variance
B. Favourable variance
C. Adverse variance
D. Labour variance
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Chapter 2
53. Apple, the leading manufacturer of iPhones, prides itself as an innovative provider of disruptive
technological products and solutions like iPads, Apple Watch etc. This is an example of:
A. Cost Leadership
B. Focus Strategy on niche market of the rich and famous
C. Stuck-in-the-middle strategy
D. Differentiation Strategy
E. Product or service based segments.
54, A global company has operations around the world and its top executives travel extensively
between countries. The company’s management are concerned about a recent sharp increase in the
price of first-class air travel. Which of the following might be used as a substitute method of travel?
A. Switch to using a different airline

B. Switch to travelling by car
C. Switch to business- class air travel
D. Reduce the amount of travelling by senior executives
55. An output specification focuses mostly on …
A. Design.
B. Innovation.
C. Performance.
D. Technicalities.
56 .Which of the following are commonly used in conjunction with an output-focused specification?
A. key performance indicators.

B. Clear conformance standards.
C. Detailed technical requirements.
D. Product brand name.
57. A procurement organisation is keen to maximise innovation available within the supply market in
the execution of an upcoming significant contract opportunity. Which of the following will enable
the organisation to achieve this goal?
A. Using an outcome focused specification.

B. Applying a precise performance framework.
C. Establishing transparent selection criteria.
D. Allowing variations to occur.
58, Which of the following are barriers to entry that commonly affect competitive in a market?
1. Inventory holding costs

2. Product diffentiation
3. Economies of scale
4. Customer switching costs
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A. 1 and 2 only
B. 1 and 3 only
C. 2 and 4 only
D. 3 and 4 only
59. A procurement manager is inputting into a specification for a new product. They have already
assessed the availability of suppliers and their relative market influence, and determined that the
source of supply are plentiful. What other factor will be important to consider in respect of
competitive market forces?
A. Competitive rivalry.
B. Power of buyers.
C. Strength of suppliers.
D. Supply chain impact.
60. Zam Manufacturing Group (Zam) has a non-complex range of components which are readily
available for an extensive range of suppliers. The manufacturing process is simple and highly
efficient. Zam’s profit margins are high. The Zam CPO’s main concern is the vast array of products it
both buys and manufactures. Which of the following should be a priority action for Zam?
A. Value analysis.
B. Value engineering.
C. Implement standardisation.
D. Process re-engineering.
61. The Gautrain in South Africa is mostly used by working professionals and business people to
commute to work and international tourists as well. The prices for train tickets are lower during the
peak hours when people are going to work. During the off-peak periods, the train tickets are
significantly higher than during the peak window. This is an example of a segmentation strategy
based on:
A. Features
B. Price Levels
C. Design
D. Packaging
E. Performance
62, A new product development team has been assisted by a procurement manager, who has
already provided the team with information about the availability of suppliers for a key component.
The manager has advised the team that there are a large number of suitable potential suppliers.
What other factor is it important to consider with regard to competitive forces in the supply market?
A. Competitive rivalry between suppliers

B. The threat of new entrants
C. The bargaining power of buyers
D. Impact on the supply chain
63. The carbonated drink Coke Zero is reportedly good for diabetic patients while the regular coke is
not suitable for them. The retail chain Spar Supermarkets stocks both products on its shelves in

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South Africa. This is an example of segmentation based on:
A. Price Levels
B. Design
C. Packaging
D. Performance
E. Features
64, The chief procurement officer (CPO) in a company has produced estimates of the operating costs
of the procurement department in the next financial year. Is the CPO correct in thinking that these
costs estimates will become the department’s operating budget for the year?
A. No, because initial cost estimates are only a starting point for preparing a budget
B. No, because the estimates might be incorrect
C. No, because the cost estimates do not include of material purchases for the
company
D. Yes, because these are the costs that the department is expecting to incur
65. Which of the following are common barriers to entry that could affect competition in a market?
1. Set-up costs.
2. Direct labour costs.
3. Customer switching costs.
4. Inventory holding costs.
A. 1 and 2 only.
B. 3 and 4 only.
C. 2 and 3 only.
D. 1 and 3 only.
66. An organisation has a very clear idea of the service it wants and has described the process
precisely in terms of how the supplier must deliver it. It is intending to produce an ‘outcome-focused
specification’. Is this the right specification approach for the organisation to use?
A. No – with an outcome- focussed specification approach, the supplier will decide how to deliver
the service.
B. No – the best approach would be open specification.
C. Yes – this specification approach allows for maximum innovation from the supplier.
D. Yes – this specification approach states expressly how the service should be delivered.
67. Which of the following are typical environmental considerations throughout the contract life
cycle? Select the TWO that apply.
A. Energy usage in manufacturing.

B. Recycle packaging.
C. Customer demand.
D. Employee welfare.
E. Standards of ethical behaviour.
68. Which of the following are typically found within conformance specifications? Select TWO that
apply.
A. Functions.
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B. Drawings.
C. Outcomes.
D. Samples.
E. Outputs.
69, Manufacturers in some industries (such as original equipment manufacturers in the car industry)
make complex products in a dynamic business environment. Which one of the following is likely to
be a priority for procurement for a car manufacturer that is switching from production of diesel-
powered cars to electric vehicles?
A. Short product lifecycles

B. Process efficiency
C. Supply chain agility and response to technological change
D. Value for money
70. On the CIPS website, CIPS student members can choose to study with approved Study Centres
which are listed according to the following markets, among others, of the global procurement
community:
i) Africa
ii) Middle East and North Africa (MENA)
Under Africa, the CIPS students must choose the Country (like South Africa) in which they reside and
choose an approved Study Centre they would like to conduct their CIPS Studies with. What kind of
segmentation has CIPS used?
A. Segmentation based on buyers

B. Segmentation based on distribution channels
C. Segmentation based on geography
D. Segmentation based on Products or Services
E. Industry Segmentation Matrix
71. Network marketing allows manufacturers of goods or services (like Edmark, Forever Living,
World Travel, MWR etc) to sell directly to consumers through the model of Independent Business
Owners (IBOs) who create their own network of clients described as down-liners. This is
segmentation based on:
A. Country Groupings
B. Exclusivity
C. Direct Marketing
D. Direct Sales
E. Distribution Channel
72, A company sells fashion clothes to the youth market at very low prices. It is continually designing
new fashion products, which it has manufacturing in the Far East. Which TWO of the following will
be major factors for successful procurement by this company?
A. Short design and production lead times

B. Product quality
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C. Fluctuating prices for fashion goods
D. Subcontracting
E. Quick response to changes in consumer tastes
73. The South African government blue print for economic growth known as the National
Development Plan (NDP) 2030 vision places manufacturing at the heart industrialization and
economic growth. However, on the 1st of June 2019, Carbon Tax was introduced and this tax is an
addition to the costs of production and lowers the profit margins for manufacturers. As a business
adviser, suggest what the South African auto manufacturers can do to lower the costs of doing
business in the country.
A. Locate in China for low cost on vehicle manufacturing

B. Create a network of car dealers where inspections and test drives are done before consumers
purchase the vehicles
C. Make uniform cars
D. Increase investment in machinery and access to skilled workforce
E. Share production facilities with other auto manufacturers
74, A manufacturer of food products purchases large quantities of vegetables and fruit from farmers
and growers around the world. Which TWO of the following factors are likely to be of most concern
for the manufacturer’s procurement function?
A. Changing consumer tastes and short product lifecycles

B. Sustainable supply
C. Variations in supply and price from one year to the next
D. Competitive tendering
E. Robotic process
75, The chief procurement officer (CPO) of an organisation is concerned that the procurement
function will be criticised for making more purchases than budgeted in the previous budget control
period. Is the CPO’s concern justified?
A. Yes, because additional purchases result in more cash outflows

B. Yes, because additional purchases result in lower levels
C. No, because additional purchases do not affect inventory levels
D. No, because purchases quantities depend largely on usage quantities
76. What are the challenges facing new players in the Construction Industry of South Africa?
A. Lack of the Porter’s 5 Forces

B. Globalisation
C. Lack of experience and reputation
D. Lack of single Standard Industry Classification (SIC) Code
E. Government policies supporting new players to enter the industry
77. The stages of the Product Life Cycle (PLC) are:
A. Decline, maturity, growth, introduction

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B. Innovators, early adopters, middle majority, laggards
C. Laggards, middle majority, early adopters, Innovators
D. Introduction, growth, maturity, decline
E. Buyer power, Supplier power, substitutes, new entrants
78. What do you understand by value-to-price ratio?
A. Switching costs in moving from one product to another

B. The value that a product provides in meeting buyer’s needs compared to its purchase price
C. Ratio of economies of scale to capital requirements
D. Ratio of direct costs to indirect costs
E. Ratio of fixed costs to variable costs
79. In the absence of open book costing, explain how you, as a buyer, can establish the breakeven
point for a particular supplier
A. Conduct plant or site visits to the suppliers premises to gain insight into supplier’s direct and
indirect costs
B. Issue RFI where potential suppliers are asked for information on their direct and indirect costs or
the ratio between the two
C. Use company annual reports and capture cost and output data points through which a line of best
fit is drawn
D. Ask an organisation’s technical staff like manufacturing engineers, R&D staff or sales staff to
provide technical data from the accounting system
80. What is the meaning of the acronym OWN-IT in collection and analysis of data?
A. Outline, Wide Search, Narrow Search, Increase your stockpile of information, Transform your
stockpile into new knowledge
B. Outsource, Win-Win, Negotiate, Integrate, Transform
C. Operations, Whole life cycle Costing,
D. Outcomes, Warranties, Normal Distribution, Issues Management, Through Life Contracts
E. Output Specification, Whole life cycle costing, non-functional requirements, internal
benchmarking, Target cost analysis
81. Which of the following describe ancillary services?

A. After sale service
B. Two or more distinctive products sold as one
C. A product sold at premium price
D. Service for digital demands
82, One of the purposes of a financial budget is:
A. To determine how procurement costs will be controlled

B. to plan what procurement prices should be in the next financial year
C. to determine the prices that will be paid for purchases in the next financial year
D. to forecast what material purchases will be in the next financial year

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83. Michael Porter’s ‘Five Forces’ model determines the extent of competition in an industry. The
five forces are:
A. Threats from New Entrants; Threats from Buyers; Threats from Sellers; Threats from Markets and
Competitive Rivalry
B. Power of New Entrants; Power of Substitutes; Buyers’ Power; Sellers’ Power and Competitive
Rivalry
C. Threats from New Entrants; Threats from Substitutes; Buyers’ Power; Sellers’ Power and
Competitive Rivalry
D. Threats from New Entrants; Threats from Substitutes; Buyers’ Power; Sellers’ Power and Perfect
Competition
84. A monopoly supplier has a high bargaining power such as being a…
A. Price Maker
B. Price Marker
C. Price Taker
D. Price Manager
85. At the ‘decline’ stage of the product life cycle, the buyer of that product would expect…
A. Price to increase
B. Price to remain stable
C. Price to fall
D. Price to double
86. Consumers in a market place who prefer to buy new technologies early in their development
are called…?
A. Leaders
B. Late adopters
C. Laggards
D. Early adopters
87. Coca Cola and Pepsi Cola provide a good example of supplier bargaining power this is known
as…
A. a monopoly market
B. a duopoly market
C. a triopoly market
D. a flexible market
88. In economic terms, margarine was introduced into a market where there was butter this is
an example of what?
A. Substitutes
B. Flavours
C. Complements
D. Equilibrium
89. Which of the following market structure with the highest barriers or highest switching costs?
A. Monopolistic competition
B. Imperfect competition

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C. Oligopoly
D. Monopoly
E. Duopoly
90. Consumers who wait until the last possible moment before changing to a new product or
service are called what?
A. Enthusiasts
B. Growers
C. Early adopters
D. Laggards
91. The Organisation of Petroleum Exporting Countries (‘OPEC’) is a sole buyer of oil rigging
equipment which gives him the buyer bargaining power this an example of…
A. a monopoly
B. a oligopoly
C. a monopsony
D. a oligopsony
92. At what stage of the Product Life Cycle would a supplier begin to earn a profit from a new
product?
A. Development
B. Growth
C. Decline
D. Maturity
93. Product life cycle is linked to the customers based on how quick they respond to the products in
the market. Middle majority are consumers/customers in the who are seen to have a bargaining
power to negotiate hard on the price?
A. True
B. False
94. Skimming prices are…

A. Normal price that a buyer pays for the goods
B. highest price when the product is launched
C. Low prices when a product is launched
D. Is the prices normally paid by the laggards
CHAPTER 3
95. The three types of performance specification are:
A. Design, Technical, Conformance

B. Statement of Work (SOW), Output, Outcome
C. Drawings, Samples, Brands
D. Statement of Needs, Procurement Specifications, Performance Specifications
E. Technical, Conformance, Performance

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96. What is the difference between an output-based specification and an outcome-based
specification?
A. Output-based specification places the risk of bad performance on the contract upon the supplier
whereas outcome-based specification places that same risk on the buyer
B. An output specification describes what is needed whereas an outcome specification explains why
it is needed
C. An outcome specification is more difficult to draft than an output specification
D. It takes an output to deliver an outcome so output specifications are therefore the same as
outcome based specifications
E. Output specification looks at the 5 Rights of procurement namely right price, right quality,
right quantity, right place and right time whereas outcome based specifications are not concerned
with the 5 Rights
97. List 5 of the questions that are asked in the Star-burst method of brainstorming:
A. 5 Whys
B. Is price right, Is quality right, Is quantity right, Is Place right, Is delivery time right?
C. What, Who, When, Where, Why
D. What is the Return on Investment, Is there Customer Satisfaction, Is Time to Market Right,
Is Productivity high, Are all stakeholders involved?
E. All of the above.
98. The three (3) types of performance specification are:

A. Outcome specification, output specification, Statement of Work (SOW) Specification
B. Statement of Work (SOW) Specification, Design Specification, Technical Specification
C. Specification by Sample, Specification by Brand, Specification by Drawing
D. Outcome Specification, Procurement Specification, Statement of Need
E. Output Specification, Statement of Work (SOW), Design Specification
99. Which statement is true about the Statement of Work (SOW)?
i).A SOW can be used together with both output and outcome specifications as supporting
document
ii). A SOW is mostly used in projects and services
iii). A SOW is a form of specification as it defines the activities, deliverables and timelines for projects
and services
iv). A design SOW provides the supplier with the purpose of the project or service but does not
specify how the work will be done or what materials are to be used
v). A level of effort and materials/Unit rate SOW is where a supplier is instructed as to how the work
should be done, the quality levels required and the specification of any materials used
vi). A performance based SOW is specifically based on standards like the ISO 9000
A. i) iv) v)
B. ii) iii) vi)
C. iii, iv) v)
D. iv), v), vi)
E. i) ii) iii)

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100. What tool would you employ to mitigate the challenges arising from the use of the internet as
a source of information for developing specifications?
A. OWN-IT
B. RAQSCI
C. ORAPAPA
D. SAMOA
E. RACI
101. Which of the following can is an example of “A” of the acronym SAMOA
A. Endorsement
B. Encyclopaedia
C. Emergent sources
D. Elegant reports
102. The Gauteng Department of Education (GDE) in 2013 developed and printed the right training
material in the English Language to help parents to get involved in their children’s school work life
under a project described as Parental Involvement Project (PIP). However, when delivered to the
districts, a significant proportion of the parents and guardians could not read and understand the
material. There was material printed in braille or large print for the blind of partially blind
respectively. To mitigate the above challenges, the Department resolved to reprint the material
again in English, Afrikaans and vernacular languages of Sepedi, Tshwana, Zulu and Venda, Tsonga. All
the languages were in one booklet and the parent would choose the relevant page to read.
Which element of through life specifications was missing in the above scenario?
A. Acceptance testing to find out whether the Department has printed the right training material
B. Functional testing to find out whether the material printed was in the language which the parents
understood
C. Black box testing of the software used in the graphic design and display of illustrations,
images and graphs used in the books
D. Alpha testing with the authors, editors, graphic designers during the development of the
training material
E. Regulation acceptance testing to check compliance with the health and safety requirements
and the South African Schools Act (SASA)
103. Inadequate specifications can take any of the following forms:
A. Defects, Over-processing, Over-production

B. Risk Register, misinterpreted need, under-specification
C. Waste, over-specification, under-specification
D. Opportunity cost, cost variance, social and environmental factors
E. Under-specification, over-specification, misinterpreted need
104, Which of the following may be found within conformance specifications but are unlikely to be
found in performance specifications? Select TWO that apply.
A. Branded products
B. Drawings
C. Variety reduction
D. Outputs

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E. Functions
105. Risk management in procurement and supply must be done in this chronological order:
A. Tolerate the risk, Treat the risk, Transfer the risk, Terminate the risk
B. Give unique identifier of each risk, Write the Date the risk was identified, provide
Description of the risk, Allocate the risk to the relevant risk Owner
C. Identify the risk, Assess the risk, Control the risk, Monitor the risk
D. Draft Project Initiation Document (PID), carry out Schedule Variance, do Cost Variance, Conduct
Stakeholder Satisfaction
E. None of the above.
106. List 6 of the major concepts or terminology associated with lean thinking in business:
A. Just in Time (JIT), Defects, Inventory, Motion, Transportation, Waiting

B. Overproduction, Not Using Talent, Six Sigma, Defects, Value Engineering, Value Analysis
C. Target Costing, Whole Life Cycle Costing, Total Cost of Ownership, Should Cost Analysis, Purchase
Cost Analysis, Price Analysis
D. Zero based Budgets, Cost Variance, Monte Carlo, Decision Support Models, Simulation
Models, Optimisation Models
E. Lead Time and Process Speed, Work in Process, Delays/Queue Time, Value Add and Non
Value Add, Process Efficiency, Waste
107. What does the acronym DOWN TIME mean in lean studies?
A. Decommissioning, Open Book Costing, Waste, Negotiation, Tendering, Internet, Middle

Majority, Ergonomics
B. Differentiation, Open Ended Problems, Whole Life Cycle Costing, Non-functional
requirements, Through Life Contracts, Invitation to Tender, MRO, Early Supplier Involvement (ESI)
C. Decision Support Models, Optimisation Models, Whole Life Cycle Costing, New Purchase,
Technical Specification, Issues Management, Modified Re-buy, Energy Efficiency
D. Direct Costs, Overheads, Work in Process, Normal distribution, Target Costs, Inventory, Monte
Carlo, Early Supplier Involvement (ESI)
E. Defects, Overproduction, Waiting, Not using Talent, Transport and handling, Inventory,
Motion Waste, Excess processing
108, The purpose of acceptance testing is to:
A. Train the user’s staff

B. Check the adequacy of the buyer’s specifications
C. Trial the item in simulated operational conditions
D. Establish change control mechanisms
109. The five (5) steps for doing value analysis are:
A. Outline, Wide Search, Narrow Search, Increase your stockpile of information, Transform your
Stockpile into new knowledge
B. Be specific, Define what is already known, create the outline, Define any gaps, Variance
Analysis
C. Purchase Cost Analysis, Negotiating, Carry out functional analysis, Pugh Analysis, Be creative
D. Gather information, Carry out functional analysis, be creative, Evaluate, Develop

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E. None of the above
110. The following are the hindrances to creativity in procurement:
A. Right answer, avoidance of ambiguity, not my area, logic, rules

B. Play is frivolous, not wanting to fail, non-value adding activities, switching cost, social and
Environmental criteria
C. Risks, past experience, people, alignment and ethics, Analysis
D. Indifferent requirements, one dimensional requirements, mandatory requirements, reverse
requirements, attractive requirements
111. Early supplier involvement is a process of involving suppliers early during the specification
design. Which of the following can be the advantage of this process
A. Reduced supply chain risk
B. Expensive process
C. Locked in a relationship
D. Quality failures
112, Track manufacturing (track) makes and sells a range of industrial products. All its products,
which are made in a fairly simple and efficient manufacturing process, are very profitable. The
components that Track uses in its products are not complex and are available from a large number
of suppliers. However, Track’s CHIEF Procurement Officer (CPO) is concerned about the large range
of items that the company both buys and manufactures. Which one of the following should the CPO
recommend for priority action by Track?
A. Standardisation
B. Five forces analysis
C. Function analysis
D. Value analysis
113. What are the six main components of a through life specification
A. Dedicate, Manufacture, Inform, In-service support, Decompose n and disposal
B. Devolve, manufacture, installation, in – service support, demolish and disposal
C. Design, materialise, installation, in-service support, decommission and dedicate
D. Design, manufacture, installation, in-service support, decommission and disposal
114, In a service level agreement there might be a risk of under-specification of the buyer’s
requirement due to a failure to:
A. Specify the service level required

B. Agree a dispute resolution procedure
C. Prepare an outcome-based specification
D. Agree the price for the service
115. Risk mitigation in procurement and supply must be done through which of the following:
A. Tolerate the risk, Treat the risk, Transfer the risk, Terminate the risk
B. Give unique identifier of each risk, Write the Date the risk was identified, provide
Description of the risk, Allocate the risk to the relevant risk Owner
C. Identify the risk, Assess the risk, Control the risk, Monitor the risk
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D. Draft Project Initiation Document (PID), carry out Schedule Variance, do Cost Variance, Conduct
Stakeholder Satisfaction
E. None of the above.
116. 4 T’s are methods of controlling the risk. Which of the following is an example of Transfer
A. Cancel the project
B. Outsourcing
C. Supplier optimisation
D. Re-shoring
117. Which of the following processes has the risk register as primary output?
A. Performance Qualitative risk analysis
B. Monitor and control risk
C. Plan risk management
D. Identify risk
118, Metal products company (MPC) manufactures a range of similar products for sale to industrial
buyers and is continually developing new and improved products to add to its range. The Chief
Procurement Officer (CPO) of MPC is concerned about the large number of new components in new
products designs, and thinks that all of these are not necessary. Which of the following measures
might the CPO therefore recommend?
A. Output-based specifications for new products

B. Value analysis
C. Variety reduction
D. Internal stakeholder involvement
119. Through-life contracts are commonly used in procuring assets such machinery or IT equipment.
A. True
B.False
120. Specifications that are prepared to consider environmental issues should look at the following
aspects
A. Remind, Rethink, Remedy, recycle
B. Reduce, re-consider, recycle, rethink
C. Rethink, reduce, recycle and reuse
D. Ready, reduce, Remedy, rethink
121, Which of the following might be consequences of under-specification? Select TWO.
A. Difficulty in comparison rival bids

B. Restricting the number of suppliers willing to bid
C. Spending money to correct the problem
D. Obtaining something that is not sufficient
E. Less scope for innovation by suppliers
122. The stage of the procurement cycle when the procurement can add most value is at the point
when the business is..
A. Setting out and defining the need
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B. Ready to source the market
C. Selecting the right supplier
D. Starting the final negotiation with a shortlisted Vendor
123. Value engineering (VE) is similar to value analysis in many ways. Which of the following explains
value engineering (VE)? Two answers apply
A. VE is concerned about the longer term issues such as cost and quality for product design and
specification
B. VE is concerned about value attached to the product during use or sampling
C. VE considers whole life costs of the product
D. VE does not consider the whole life cost of the product
124. Green issues have come to the forefront in recent years. Which of the following would be used
to reduce waste in a business?
A. Increase the use of pesticides
B. Reduce the development of recyclable products
C. Increase the use of plastic bags
D. Reduce product packaging
125. Which of the following are likely benefits from a successful initiative for standardisation and
variety reduction? Select TWO.
A. Less risk of stock obsolescence

B. Larger supplier base
C. Simplified procurement procedures
D. Improved product quality
E. Smaller range of finished goods products
126, An example of over-specification is:
A. Using conformance specification rather than outcome-based specifications

B. Specifying more restrictive tolerances than needed
C. Misunderstanding the buyer’s requirements
D. Under-stating the required production volume capacity for a machine
127, A benefit of a through-life contract with a manufacturer for the procurement and
installation of an item of equipment, and ongoing support through its operational life, is:
A. A securing the supply of replacement parts
B. A guarantee of technology updates
C. Greater reliability of the equipment
D. Simplification of the procurement process
128, A company is planning the procure of an IT system and wants to agree a through-life
contract with the supplier to ensure ongoing system support. An initial step in the
procurement process should be to:
A. Prepare specifications
B. Consult internal stakeholders about their requirement
C. Identity the IT system supplier
D. Prepare a score document

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129, Which of the following might typically be included in an output-based specification?
Select TWO.
A. A sample
B. Packaging specifications
C. Composition specifications
D. Required quality levels
E. Required quality environmental performance levels
130, An organisation intends to prepare invitations to tender (ITTs) for a contract for the
provision of a service. The organisation has procured similar services in the past and has a very
clear and detailed idea of the service that it wants this time. The organisation intends to prepare
an outcome-based specification, to issue with the ITTs. Is this the appropriate type of
specification for the organisation to use?
A. Yes, because outcome-based specifications are the easiest type of specification to

prepare
B. Yes, because outcome- based specifications give suppliers the greatest scope to
innovate
C. No, because with an outcome specification, the supplier decided how the service
will be delivered
D. No, because the specification should focus on specifying outputs rather than
outcomes
131. Which of the following statement explains value analysis?

A. A study of eliminating unnecessary cost that do not add value to the product or a service during
the design stage
B. A study of eliminating unnecessary cost in existing products that do not add value to the product
or a service
C. Is the value that something creates or provides through use
D. Is the value that the buyer attaches to the item
132. In recent years there has been raised awareness on Sustainability, a buyer may wish include
social criteria in specifications. Which of the following is an example of the social criteria. Two
answers may apply
A. Promoting local communities and local employment

B. Insisting on getting lower prices from individuals or small businesses
C. All contracts the buyer will award are based on fixed price arrangement
D. The supplier must comply with all laws and regulations relating to employees rights

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1. What are the obligations created by the above procurement?

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4. Straight re-buy means purchasing the same item as previously:

7. Which of the following describes target costing?

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A. Return on Investment, Cost, Quality, Delivery, Risk

A. Increase in the rate of use

16. What does the acronym RAQSCI stand for?

20. A cash register in a flourist business can be regarded which of a cost

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22. RASCI Service requirements can be defined by which of the following?

A. To find the main causes of the problems

A. Look for a substitute item to buy

29. Which of the following statements is true about costs?

i) All fixed costs are indirect costs

A. iii) iv) v) vi)

30. In breakeven analysis

Which of the following defines breakeven point?

A. Deducting the supplier’s estimated profit margin from its prices

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A. i) iii) v) vi) vii)

A. Limited number of bids

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45. The three basic groups of WLC model are as follows:

A. Monte Carlo, Histogram, Normal Distribution

46. Which of the following statements is true about PCA Techniques?

i) Arm’s length relationship is not suitable for ongoing purchases

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A. To monitor the supplier’s fixed and variables costs

49. The best way to manage a budget is to do the following:

A. To save costs since expenditure is zero

A. Switch to using a different airline

55. An output specification focuses mostly on …

A. key performance indicators.

A. Using an outcome focused specification.

1. Inventory holding costs

A. Competitive rivalry between suppliers

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A. Energy usage in manufacturing.

A. Short product lifecycles

A. Segmentation based on buyers

A. Short design and production lead times

A. Locate in China for low cost on vehicle manufacturing

A. Changing consumer tastes and short product lifecycles

A. Yes, because additional purchases result in more cash outflows

A. Lack of the Porter’s 5 Forces

77. The stages of the Product Life Cycle (PLC) are:

A. Decline, maturity, growth, introduction

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78. What do you understand by value-to-price ratio?

A. Switching costs in moving from one product to another

81. Which of the following describe ancillary services?

82, One of the purposes of a financial budget is:

A. To determine how procurement costs will be controlled

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84. A monopoly supplier has a high bargaining power such as being a…