Print Share Home

CPSM Questions

QUESTIONS

1. Which of the following depreciation methods is the simplest to calculate and makes the assumption that it is a function of time rather than use?

(A) Declining Balance Method
(B) Straight Line Method
(C) Sum of Years Digits Method
(D) Units of Activity Method

2. A commodity manager is attending a trade show in Europe. During a private conversation with a supplier, the supplier silently slides an envelope across the table toward the commodity manager. Which of the following is the MOST appropriate course of action for the commodity manager to take?

(A) Pick up the envelope and look inside, as the supplier did not say what it contains.
(B) Ask the supplier what is in the envelope before picking it up.
(C) Ask the supplier to open and explain the contents of the envelope.
(D) Leave the room and find a colleague to join the conversation.

3. TUV Company’s product manufacture relies upon the use of a highly toxic chemical compound as an input, of which the byproduct is a highly toxic, corrosive liquid. The disposal costs for this byproduct have been increasing dramatically each year. TUV’s suppliers have made several proposals to deal with this problem, all of which would cost roughly the same but yield different impacts. Which of the following proposals should the organization adopt achieve the MOST benefit?

(A) Purchase a naturally occurring additive that increases the effectiveness of the toxic input by 75 percent, and yields water as an additional byproduct.
(B) Purchase a naturally occurring additive that neutralizes the toxic liquid byproduct so that it is no longer corrosive.
(C) Install a filtering system that removes solids from the toxic liquid byproduct so that it can be sold for use in other applications.
(D) Install a recirculation system that allows the use of some of the toxic liquid byproduct for cleaning the piping systems within the plant.

ANSWERS

1. Option B is correct because straight line depreciation is calculated by taking the purchase/ acquisition price of an asset minus its salvage value, then dividing by projected total productive years (useful life) of the asset. This is considered the simplest and most commonly used depreciation method. It yields lower write-offs and provides less of a tax break than the accelerated depreciation method.

Bibliographic Key:

#1A: Cost and Finance, 1-B-5, “Develop financing and leveraging strategies for purchases.”

2. Option D is correct, as the commodity manager’s actions are avoiding an appearance of impropriety. Option A is not correct, as examining the envelope’s contents shows interest in what it may contain. Option B is incorrect. The commodity manager is giving the appearance that he or she is interested in the contents. Option C is incorrect. While the commodity manager may think the supplier may be shamed if he or she must explain the contents of the envelope, the commodity manager is still sending the message that the envelope is of interest.

Bibliographic Key:

#1A: Social Responsibility, 1-D-1, “Develop and act upon a code of business conduct for the supply management function and external suppliers.”

#2: Chapter 9, “Sustainability and Social Responsibility”

3. Option A is correct because the ability to reduce the quantity of hazardous materials coming into the company will reduce the generation of waste and the need for disposition and associated costs. Options B and C are incorrect because reusing or recycling these materials implies generation of more materials that may incur additional costs. Both are sound practices and should be part of the program, but would likely be a later step. Option D is incorrect because it would only divert a portion of the waste, minimally affecting environmental impact and disposal costs.

Bibliographic Key:

#1A: Social Responsibility, 1-D-2, “Establish and monitor environmentally responsible and compliant programs throughout the supply chain and life cycle.”

#2: Chapter 9, “Sustainability and Social Responsibility”

Return to September/October Table of Contents page