CPSM Supply Management Core 2 — Questions and Answers
Question 1: Which cost analysis technique separates a supplier's price into labor, material, overhead, and profit components?
- Total cost of ownership
- Price analysis
- Cost analysis (Correct answer)
- Value analysis
Correct answer: Cost analysis
Cost analysis breaks down a supplier's price into its constituent cost elements to evaluate reasonableness, while price analysis compares price without examining cost structure.
Question 2: A buyer negotiates a contract where the seller is reimbursed for all allowable costs plus a fixed dollar fee. This is a:
- Fixed-price incentive contract
- Cost-plus-fixed-fee contract (Correct answer)
- Cost-plus-percentage-of-cost contract
- Time-and-materials contract
Correct answer: Cost-plus-fixed-fee contract
A cost-plus-fixed-fee (CPFF) contract reimburses actual allowable costs and adds a predetermined fee that does not change with cost outcomes.
Question 3: The Economic Order Quantity (EOQ) model minimizes the sum of which two inventory costs?
- Purchase price and freight costs
- Ordering costs and carrying costs (Correct answer)
- Setup costs and quality costs
- Lead time costs and stockout costs
Correct answer: Ordering costs and carrying costs
EOQ balances ordering (acquisition) costs, which decrease with larger order sizes, against carrying (holding) costs, which increase with larger order sizes.
Question 4: A supply manager discovers a sole-source supplier has increased prices by 18% citing raw material inflation. The BEST first step is to:
- Immediately accept the increase to maintain supply continuity
- Request a cost breakdown and market data to validate the claim (Correct answer)
- Dual-source the part within 30 days
- Escalate to legal for breach of contract review
Correct answer: Request a cost breakdown and market data to validate the claim
Requesting a cost breakdown with supporting market indices allows the buyer to validate whether the claimed inflation justifies the price increase before accepting or rejecting it.
Question 5: Which incoterm transfers risk from seller to buyer at the named port of destination after the goods are unloaded?
- CIF
- DAP
- DDP (Correct answer)
- FOB
Correct answer: DDP
DDP (Delivered Duty Paid) places maximum obligation on the seller, who bears all risks and costs including import duties until goods are delivered to the named destination.
Question 6: Make-or-buy analysis should consider all of the following EXCEPT:
- Core competency alignment
- Available internal capacity
- Supplier's shareholder equity (Correct answer)
- Total cost comparison
Correct answer: Supplier's shareholder equity
A supplier's shareholder equity is not directly relevant to make-or-buy analysis, which focuses on cost, capacity, competency, and strategic fit.
Question 7: A blanket purchase order is BEST described as:
- A single-use order for a specific quantity at a firm price
- An agreement to purchase an unspecified quantity over a period at agreed terms (Correct answer)
- A contract requiring progress payments before delivery
- A purchase order issued to multiple suppliers simultaneously
Correct answer: An agreement to purchase an unspecified quantity over a period at agreed terms
A blanket purchase order establishes pricing and terms for repeated purchases over a defined period without specifying exact quantities or delivery dates in advance.
CPSM Supply Management Core 2
Which cost analysis technique separates a supplier's price into labor, material, overhead, and profit components?