APP Purchasing Principles 2 — Questions and Answers
Question 1: Which purchasing strategy involves maintaining multiple approved suppliers for a single commodity to reduce supply risk?
- Single sourcing
- Dual or multiple sourcing (Correct answer)
- Sole sourcing
- Preferred sourcing
Correct answer: Dual or multiple sourcing
Multiple sourcing spreads risk across several suppliers, ensuring continuity if one supplier fails.
Question 2: What is the primary purpose of a Request for Quotation (RFQ)?
- To explore supplier capabilities
- To obtain competitive pricing for well-defined goods or services (Correct answer)
- To negotiate long-term contracts
- To evaluate supplier financial stability
Correct answer: To obtain competitive pricing for well-defined goods or services
An RFQ is used when specifications are clearly defined and the buyer wants competitive price bids.
Question 3: Under the Uniform Commercial Code (UCC), what is the statute of limitations for breach of contract for the sale of goods?
- 1 year
- 2 years
- 4 years (Correct answer)
- 6 years
Correct answer: 4 years
The UCC sets a 4-year statute of limitations for breach of contract claims involving the sale of goods.
Question 4: Which cost analysis technique separates a supplier's price into its component parts (labor, material, overhead, profit)?
- Should-cost analysis (Correct answer)
- Total cost of ownership
- Price index analysis
- Market basket analysis
Correct answer: Should-cost analysis
Should-cost analysis breaks down what a product or service ought to cost based on its constituent elements.
Question 5: A buyer receives goods that appear damaged upon delivery. What should the buyer do FIRST?
- Return the goods immediately
- Note the exception on the delivery receipt before signing (Correct answer)
- Contact the supplier's legal team
- Initiate a formal claim with insurance
Correct answer: Note the exception on the delivery receipt before signing
Noting exceptions on the delivery receipt preserves the buyer's rights and documents the damage at point of receipt.
Question 6: What does 'just-in-time' (JIT) purchasing primarily aim to reduce?
- Supplier lead times
- Inventory carrying costs (Correct answer)
- Purchase order processing time
- Number of approved suppliers
Correct answer: Inventory carrying costs
JIT purchasing schedules deliveries to arrive exactly when needed, minimizing inventory holding costs.
Question 7: Which of the following best describes 'price analysis'?
- Examining a supplier's internal cost structure
- Comparing offered prices to benchmarks without cost breakdown (Correct answer)
- Calculating total cost of ownership
- Assessing supplier profitability margins
Correct answer: Comparing offered prices to benchmarks without cost breakdown
Price analysis evaluates the reasonableness of a price by comparing it to market rates, historical prices, or catalog prices without examining cost details.
APP Purchasing Principles 2
Which purchasing strategy involves maintaining multiple approved suppliers for a single commodity to reduce supply risk?