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CPSM Questions

QUESTIONS

1. A supply manager for an apparel company must decide whether to change suppliers of polyurethane hangers for the finished products that are shipped to retailers. It will cost approximately $20,000 to make all of the necessary changes to the company’s operation in order to take on a new supplier. The current supplier is priced $0.05 per unit higher than the lowest competitor. The lowest competitor’s quality and service are equal to that of the current supplier. What quantity of hangers will the supply manager need to buy to justify making the change on a cost basis?

(A) 40,001
(B) 50,001
(C) 400,001
(D) 500,001

2. Bank A, with more than 100 branches, acquires Bank B, which has 30 branches. In several cities, both banks have branches at the same intersection. Which of the following factors is LEAST likely to determine what locations will be divested after the merger?

(A) Condition of facilities
(B) Customer base
(C) Occupancy costs
(D) Original ownership

3. Supply manager Williams has been in the field for 15 years, beginning as an expediter, and moving rapidly through the ranks as buyer, commodity manager, and project leader. Williams currently oversees strategic sourcing of direct materials. Williams becomes mentor to junior buyer Carter. Carter reports to the new product development department and has been employed for just over a year. Carter is responsible for many of the tactical transactions related to procuring parts for new product development. Carter has seen other junior buyers become frustrated and bored with the daily routine of placing orders, expediting parts, and clearing receiving discrepancies. Carter has seen others leave the organization and be hired at higher levels and salaries by other companies. Given this situation, which is the BEST course of action for Williams to take?

(A) Listen to Carter’s frustrations and acknowledge the problems
(B) Encourage Carter to focus on upgrading professional skills
(C) Explain how purchasing has evolved into supply management
(D) Discuss how the junior buyer position supports the organization’s objectives

ANSWERS

1. Option C is correct because a savings of five cents ($0.05) per unit times 400,000 units equals $20,000, which is the cost to the buying organization to make changes necessary to switch suppliers. Cost savings, including payback, begin with purchase of the first unit above 400,000.

Bibliographic Key:

#1A: Cost and Finance, 1-B-4, “Perform cost/benefit analyses on acquisitions.”

#2: Chapter 3, “Strategic Cost Management”

#5: Chapter 37, “Capital and Its Impact on the Organization”

2. Option D is correct because original ownership is less significant than current (and projected) benefits of the facilities. Condition (Option A), customer base (Option B) and occupancy costs (Option C) are more important to decisions about which facilities will best meet the larger organization’s needs.

Bibliographic Key:

#1C: Leadership, Task 3-A-6, “Participate in company acquisitions and/or mergers and/or divestitures to assure the continuity of supply and capture synergy opportunities.”

#4: Chapter 5, “Assessing, Mitigating and Managing Supply-Based Risks”

#4: Chapter 6, “Developing Business Plans”

3. Option B is correct because Williams can thereby offer Carter positive ways to focus efforts and become more promotable. At the same time, this may enhance Carter’s perspective on supply management’s changing dimensions. Listening to and acknowledging Carter’s frustrations (Option A) may be friendly and supportive, but dwelling too much on problems may have negative impacts on the organization. Discussion of how supply management has grown from purchasing (Option C) is interesting but does not address Carter’s frustrations. Talking about the contributions of the junior buyer position (Option D) may be encouraging, but does not offer Carter any way to advance.

Bibliographic Key:

#1C: Leadership, 3-A-12, “Hire, develop, retain, promote and/or dismiss supply management personnel.”

#4: Chapter 9, “Staffing and Supply Management Organization”

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