APP Purchasing Principles 1 — Questions and Answers
Question 1: What is the primary objective of purchasing in a business?
- Increase taxes
- Acquire goods at the lowest possible quality
- Obtain goods and services at the best value (Correct answer)
- Delay procurement for cost-saving
Correct answer: Obtain goods and services at the best value
The goal of purchasing is to acquire the right quality of goods or services at the right time, in the right quantity, from the right source, at the right price.
Question 2: Which of the following best defines the term 'lead time'?
- Time to train new staff
- Time to finish annual reporting
- Time between order and delivery (Correct answer)
- Time to cancel a contract
Correct answer: Time between order and delivery
Lead time is the period between placing an order and receiving the goods, and is crucial for maintaining proper inventory levels.
Question 3: Which department is most likely to work closely with purchasing?
- Human Resources
- Production (Correct answer)
- Marketing
- Public Relations
Correct answer: Production
The production department depends on purchasing to supply the materials needed for manufacturing on time and in the right quantity.
Question 4: What is 'just-in-time' (JIT) purchasing?
- Ordering in bulk to get discounts
- Stockpiling for emergencies
- Receiving goods only as needed (Correct answer)
- Delaying all orders
Correct answer: Receiving goods only as needed
Just-in-time purchasing focuses on receiving goods only when needed, reducing inventory carrying costs and waste.
Question 5: What is the main advantage of centralized purchasing?
- Increased paperwork
- Better pricing and standardization (Correct answer)
- Slower decision-making
- Isolated departments
Correct answer: Better pricing and standardization
Centralized purchasing allows for bulk buying, standardization, and cost efficiency through economies of scale.
Question 6: What is a purchase requisition?
- Supplier invoice
- Internal request for purchase (Correct answer)
- Sales contract
- Shipping receipt
Correct answer: Internal request for purchase
A purchase requisition is an internal document requesting the procurement of a good or service, typically sent to the purchasing department.
APP Purchasing Principles 1
What is the primary objective of purchasing in a business?