2012 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.Chapter 3Purchasing Policy and ProceduresTRUE/FALSE1.Although policies are usually documented in writing, unwritten or informal policies can also exist.ANS:TPTS:12.Once written, policies do not have to be periodically reviewed for clarity and conformance.ANS:FPTS:13.Policies defining the role of purchasing often serve as a general or broad policy statement from which more detailed or specific policies evolve.ANS:TPTS:14.The organization's policy on contacts and visits to suppliers should address not only purchasing personnel but also other departments or functions that visitor contact suppliers.ANS:TPTS:15.Buyers do not need to consider a supplier's ability to comply with environmental regulations as a condition for selection.ANS:FPTS:16.Although there is a trend toward less reliance on competitive bids and more on negotiated longer-term agreements, many contracts are still awarded through the competitive bid process.ANS:TPTS:17.Routine items available from many different sources are seldom purchased through competitive bidding.ANS:FPTS:18.Organizations do not need to be cautious about liabilities associated with accepting and using ideas provided by suppliers interested in doing business with a purchaser.ANS:FPTS:19.For companies that routinely use or produce hazardous materials, the law requires a policy that outlines in detail the legal requirements and conditions for the handling of toxic waste.ANS:TPTS:110.A procedure is ineffective if it specifies too many steps to carry out or presents unnecessary detail.ANS:TPTS:111.It is only the supervisor's responsibility, and not the employee's, to ensure that the purchasing employee is familiar with and follows the procedures covering legal contracts.ANS:FPTS:1MULTIPLE CHOICE1.____ refer(s) to the set of purposes, principles, and rules of action that guide an organization.a.Government regulationsb.Proceduresc.Guidelinesd.Work rulese.PolicyANS:EPTS:12.____ refer(s) to standard operating procedures along with any rules and regulations.a.Union contractsb.Rules of actionc.Government regulationsd.Policye.OSHA rulesANS:BPTS:13.Which of the following is not an advantage of written and implied policies?a.Policies are a means for executive management to communicate its leadership and views.b.Policies provide a framework for consistent decision making and action.c.Policies are easy to communicate throughout an organization.d.Policies help ensure that personnel act in a manner consistent with executive or functional management's expectations.e.An effective policy defines the rules and procedures that apply to all employees.ANS:CPTS:14.Which of the following is not a disadvantage of written and implied policies?a.Personnel only follow policies to ingratiate themselves with executive management.b.Employees may view policies as a substitute for effective management.c.Policies are not a set of how-to instructions designed to provide specific answers for every business decision.d.Policy development can restrict innovation and flexibility.e.Policies are often difficult to communicate throughout large organizations.ANS:APTS:15.All of the following are characteristics of effective policies except ____.a.action-orientedb.relevantc.concised.highly detailed and written.e.timely and currentANS:DPTS:16.Policies to define the role of purchasing do all of the following except ____.a.detail the authority of purchasing to delegate certain tasks or assignments to other departmentsb.describe the areas where purchasing authority does or does not existc.outline the overall authority of purchasing as granted by the executive committee while describing the limits to that authorityd.exclude the purchasing function from any responsibility for purchasing such things as real estate, medical insurance policies, or other areas where purchasing may not have direct expertisee.define appropriate buyer-supplier relationshipsANS:EPTS:17.Which of the following is not a policy defining the conduct of purchasing personnel?a.Mileage reimbursement policy.b.Ethics policy.c.Reciprocity policy.d.Policy on contacts and visits to suppliers.e.Policies on former employees representing suppliers.ANS:APTS:18.____ occurs when suppliers are pressured to purchase the buyer's products or services as a condition of securing a purchase contract.a.Negotiationb.Competitive biddingc.Reciprocityd.Irregular business dealinge.None of these choices.ANS:CPTS:19.Examples of irregular dealings with suppliers include all of the following except ____.a.accepting bribes from suppliersb.accepting business lunches before a contract is negotiatedc.accepting late bidsd.owning a stake in a supplier's companye.cronyismANS:BPTS:110.All of the following are examples of problem factors that confront minority suppliers except ____.a.lack of access to capitalb.large firms' efforts to optimize their supply basesc.inability to attractd.preference for bidding on government contractse.minority suppliers' relatively small sizeANS:DPTS:111.Which of the following is not a best practice for inclusion in any minority supplier development initiative?a.Ensure that all minority suppliers are located nearby the organization's facilities.b.Mandate Tier-I suppliers to have a Tier-II diversity spend goal and incorporate the terms in the contracts.c.Include minority suppliers in all RFQs without exception.d.Tie the goals and objectives of the supplier diversity program to supply chain management strategies and supply chain job functions.e.Incorporate all corporate functions in which suppliers are selected and procurement commitments are made.ANS:APTS:112.Which of the following is not one of the principles that support positive buyer-supplier relationships?a.Treating suppliers fairly and with integrity.b.Providing prompt payment to suppliers.c.Encouraging suppliers to submit innovative ideas with joint sharing of benefits.d.Establishing a fair process to award purchase contracts.e.Providing engineering and manufacturing technical assistance.ANS:EPTS:113.All of the following are examples of elements that must be part of an environmental management system required by the ISO 14000 certification process except ____.a.create an environmental policyb.set appropriate environmental goals and objectivesc.provide evidence of financial stabilityd.help design and implement a program aimed at achieving environmental goals and objectivese.monitor and measure the effectiveness of general environmental management activities within the firmANS:CPTS:114.Which of the following is not an example of typical charge-back costs associated with supplier responsibility for defective material shipments?a.Sales, general, and administrative costs.b.Cost of material rework.c.Repackaging costs for return shipment.d.Return shipping costs.e.Costs associated with lost or delayed production.ANS:APTS:115.A/An ____ is an operating instruction detailing functional duties or tasks.a.policyb.procedurec.work ruled.guidelinee.policy manualANS:BPTS:116.Which of the following is not true concerning the purposes of a procedure manual?a.The manual outlines the broad set of purposes, principles, and rules of action that guide an organization.b.The manual serves as a reference guide for purchasing personnel and is especially valuable to new employees who require explanation about how to accomplish different activities or assignments.c.For experienced personnel, the manual provides clarification or simply reinforces knowledge about different topics.d.The manual provides consistency and order by documenting the steps and activities required to perform a task.e.The manual may specify industry best practices to follow that are identified through benchmarking comparisons with leading firms.ANS:APTS:117.All of the following are examples of topics discussed in legal contract procedures except ____.a.basic contract principlesb.execution and administration of agreementsc.compliance with contract terms and performance assessmentd.legal definitionse.how to conduct a supplier evaluationANS:EPTS:1