40) The creation of a vender certification program requires:
A) a vendor rating scale developed by the company.
B) a firm price list from the vendor, good for three years.
C) membership in the SBA vendor certification program.
D) understanding the firm’s EOQ.
Topic: Vendor Certification
AACSB: Analytic Skills
41) The first step in developing a vendor certification process is to:
A) develop a grading scale for vendors.
B) identify the most important criteria.
C) create a list of vendors to be evaluated.
D) weight the criteria used to evaluate the vendors.
Topic: Vendor Certification
AACSB: Analytic Skills
42) The vendor certification process assumes:
A) all vendors are charging the same prices.
B) the use of a cross-functional team to conduct the evaluation.
C) the business owner has detailed knowledge of the vendors.
D) vendors are publicly owned so information can be gathered on each of them.
Topic: Vendor Certification
AACSB: Analytic Skills
43) When seeking suppliers, a small business owner should use which of the following sources?
A) Competitors
B) The local telephone directory
C) The industry trade association
D) All of these
Topic: Vendor Certification
AACSB: Analytic Skills
11
44) If a small business owner wanted an international vendor, he/she could use:
A) MacRae’s Blue Book.
B) Thomas.net.
C) Kelly’s Manufacturer and Merchant’s Directory.
D) Sources of State Information and State Industrial Directories.
Topic: Vendor Certification
AACSB: Analytic Skills
45) The advantages resulting from concentrating purchases with a single supplier include:
A) protection from fraudulent vendors and excess inventory.
B) a longer lead time.
C) lower usage rates.
D) the ability to negotiate the best price package.
Topic: Price
AACSB: Analytic Skills
46) ________ is the right to ownership of property and, for a small business owner, determines
who has responsibility for ownership.
A) Identification
B) Risk of loss
C) Concept of title
D) F.O.B.
Topic: Title
AACSB: Analytic Skills
47) The first rule governing transfer of title and risk of loss states that:
A) title transfers to the buyer as soon as the goods are delivered.
B) the buyer has both title and risk of loss as soon as the goods are paid for, regardless of their
physical location.
C) the supplier and small business may agree to a shift of the risk of loss at any time during the
transaction between them.
D) title transfers to the buyer as soon as the goods are in the hands of the carrier.
Topic: Title
AACSB: Analytic Skills
12
48) Newton orders 14 electric staplers for his office supply store from Home Office Suppliers.
The contract specifies shipping terms as “F.O.B. Home Office Suppliers.” Home Office Suppliers
delivers the goods to Zippy Shippers and invoices Newton. The electric staplers never arrive, and
Newton refuses to pay Home Office Suppliers. Home Office Suppliers sues Newton for the
contract price of the staplers. Who wins?
A) Newton, because it wasn’t his fault that the staplers never arrived.
B) Home Office Suppliers, because they were the last ones to touch the goods.
C) Newton, because in an F.O.B. contract, the risk of loss does not shift to the buyer until the
goods are actually delivered to the buyer.
D) Home Office Suppliers, because in an F.O.B. seller contract, risk of loss shifts to the buyer
when the seller delivers the goods to the carrier.
Topic: Risk of Loss: Rule 2. F.O.B. Seller
AACSB: Reflective Thinking
49) Buyer owns a retail shop in Baltimore. Seller is a manufacturer in San Diego. Buyer orders
from seller to be shipped “F.O.B. San Diego.” Risk of loss passes to the buyer when:
A) the seller delivers the goods to the carrier.
B) the goods are identified to the contract.
C) the contract is made.
D) the goods are delivered to the buyer’s retail shop.
Topic: Risk of Loss: Rule 2. F.O.B. Seller
AACSB: Reflective Thinking
50) “F.O.B. seller” means that:
A) title passes to the buyer when the seller delivers the goods to the buyer.
B) risk of loss transfers to the buyer when the seller delivers the goods to the carrier.
C) the seller pays all shipping and transportation costs.
D) the buyer has both title and risk of loss as soon as the goods are paid for, regardless of their
physical location.
Topic: Risk of Loss: Rule 2. F.O.B. Seller
AACSB: Analytic Skills
13
51) “F.O.B. buyer” means that:
A) title passes to the buyer when the seller delivers the goods to the shipper.
B) risk of loss passes to the buyer when the seller delivers the goods to the buyer’s place of
business.
C) the buyer pays all shipping and transportation costs.
D) both title and risk of loss pass to the buyer immediately upon payment of the contract
regardless of location of the goods.
Topic: Risk of Loss: Rule 3. F.O.B Buyer
AACSB: Analytic Skills
52) The responsibility for verifying the identity and condition of merchandise:
A) is the seller’s.
B) is the carrier’s.
C) depends on the nature of the contract between buyer and seller.
D) is the buyer’s.
Topic: Receiving Merchandise
AACSB: Analytic Skills
53) The small business gains what advantage by selling on consignment?
A) Shorter lead time when reordering than with standard contracts
B) Better customer service
C) Not bearing the risk of loss for the consigned goods
D) Receiving absolute title to the goods prior to paying for them
Topic: Selling on Consignment
AACSB: Analytic Skills
54) The kaizen philosophy holds that:
A) once an improvement is implemented, no other improvements are necessary.
B) small improvements made continuously over time accumulate into a radically reshaped and
improved process.
C) major improvements made continuously over time accumulate into a radically reshaped and
improved process.
D) None of the above
Topic: Quality
AACSB: Analytic Skills
14
55) TQM is not a ________ or ________ program that can magically push a company to world-
class status overnight.
A) quick-fix; short-term
B) quick-fix; long-term
C) long fix; long-term
D) None of the above
Topic: Tools for Ensuring Quality: Total Quality Management and Six Sigma
AACSB: Analytic Skills
56) What are the two basic tenets of TQM?
A) employee involvement
B) teamwork
C) technology
D) Both A and B
Topic: Shift from a Management-Driven Culture to a Participative, Team-Based One
AACSB: Analytic Skills
57) One of the most important factors in making long-term, constant improvements in a
company’s processes is ________ the philosophy and the tools of TQM.
A) teaching customers
B) teaching workers
C) teaching vendors
D) teaching manufacturers
Topic: Shift from a Management-Driven Culture to a Participative, Team-Based One
AACSB: Analytic Skills
58) Pareto’s Law (also called the 80/20 Rule), states that:
A) 20 percent of a company’s quality problems comes from just 80 percent of all causes.
B) 80 percent of accounts receivable comes from 20 percent of customers.
C) 80 percent of a company’s quality problems arise from just 20 percent of all causes.
D) 20 percent of a company’s revenue comes from just 80 percent of all customers.
Topic: Use Pareto’s Law to Focus TQM Efforts
AACSB: Reflective Thinking
15
59) To implement TQM successfully, a small business owner must rely on 10 fundamental
principles. One principle states:
A) share information with everyone in the organization.
B) information needs to be handled by only the top management.
C) information needs to be handled by only the lower level workers who deal with the products
every day.
D) All of the above
Topic: Total Quality Management
AACSB: Analytic Skills
60) Determining factors of setting up or ordering costs for products are:
A) the various expenses incurred in actually ordering materials.
B) the various expenses incurred in actually ordering inventory.
C) setting up the production line to manufacture.
D) All of the above
Topic: Setup (Ordering) Costs
AACSB: Analytic Skills
61) Setup or ordering costs are found by multiplying:
A) the number of orders made in a year by the cost of placing a single order.
B) the number of production runs in a year by the cost of setting up a single production run.
C) Both A and B
D) Neither A nor B
Topic: Setup (Ordering) Costs
AACSB: Analytic Skills
62) The EOQ formula simply balances the ordering cost and the carrying cost of the small
business owner’s inventory so that total costs are ________.
A) optimized
B) minimized
C) maximized
D) calculated
Topic: Solving For EOQ
AACSB: Analytic Skills
16
63) The small business owner who sells merchandise on a consignment basis realizes the
following advantages except:
A) the owner does not have to invest money in these inventory items, but the merchandise on
hand is available for sale.
B) the owner does not make payment to the consignor until the item is sold.
C) because the consignment relationship is founded on the law of agency, the consignor never
takes title to the merchandise and does not bear the risk of loss for the goods.
D) the supplier normally plans and sets up displays for the merchandise and is responsible for
maintaining it.
Topic: Selling on Consignment
AACSB: Reflective Thinking
64) Improving quality:
A) lowers the associated cost with scrap.
B) reduces rework time.
C) increases worker productivity.
D) All of the above
Topic: Quality
AACSB: Analytic Skills
65) Generally, quality control impacts:
A) revenues.
B) gross profit.
C) reduction in costs.
D) All of the above
Topic: Quality
AACSB: Analytic Skills
66) Which of the following are the categories of quality?
A) Vendor based
B) Distribution based
C) User based
D) None of the above
Topic: Quality
AACSB: Analytic Skills
17
67) Which of the following statements is correct?
A) Benchmarking is the process of calculating carrying cost, EOQ and other inventory
management procedures and being able to compare it to others.
B) Benchmarking is the process of identifying world-class processes or procedures currently
being employed and building higher quality standards around these for your firm.
C) Benchmarking is the when a firm evaluates all its supply chain management for higher quality
and price.
D) All of the above
Topic: Total Quality Management
AACSB: Analytic Skills
68) To give employees a sense of how the quality of their job fits into the big picture, many TQM
companies engage in:
A) paying more to their employees.
B) hiring more qualified employees with advanced degrees.
C) offering cross-training.
D) All of the above
Topic: Total Quality Management
AACSB: Analytic Skills
69) ________ relies on data-driven statistical techniques to improve quality.
A) Six Sigma
B) Fishtake charts
C) EOQ
D) None of the above
Topic: Six Sigma
AACSB: Analytic Skills
70) Which of the following cost typically is included in obtaining materials and inventory?
A) Receiving and inspecting
B) Handling
C) PO processing
D) All of the above
Topic: Quantity: Economic Order Quantity
AACSB: Analytic Skills
18
71) Which of the following statements is correct?
A) Supply-chain management includes hiring the qualified HR Director.
B) Supply-chain management includes all the activities that produce goods and services and
delivers them to the customer.
C) Supply-chain management includes providing quality service.
D) All of the above
Topic: Price
AACSB: Analytic Skills
72) Most entrepreneurs can neglect the purchasing function because they buy so little from
vendors they don’t gain anything by spending time working on improving it.
Topic: Introduction
AACSB: Analytic Skills
73) The purchasing plan should identify a company’s quality requirements, its cost targets, and
the criteria for determining the supplier.
Topic: Quality
AACSB: Analytic Skills
74) The purchasing plan is developed independently from other functional areas of a business.
Topic: Quality
AACSB: Analytic Skills
75) Once the merchandise is received, it is not necessary for the buyer to verify its identity and
condition.
Topic: Receiving Merchandise
AACSB: Analytic Skills
76) Proper control techniques in receiving merchandise prevent the small business owner from
paying for suppliers’ and shippers’ mistakes.
Topic: Receiving Merchandise
AACSB: Analytic Skills
19
77) The business owner (called the consignor) may return any unsold merchandise to the supplier
without obligation.
Topic: Selling on Consignment
AACSB: Analytic Skills
78) The implementation of TQM is relatively simple in that other than training managers and
employees little else needs to be changed in the company.
Topic: Total Quality Management
AACSB: Analytic Skills
79) Statistical process control is central to the success of Total Quality Management efforts.
Topic: Total Quality Management
AACSB: Analytic Skills
80) Implementing TQM means a radical change in the management of information in that much
more information must be shared with workers.
Topic: Total Quality Management
AACSB: Analytic Skills
81) Another process central to the successful implementation of TQM is identifying the
individual(s) responsible for any mistakes as part of fixing the immediate quality problems.
Topic: Total Quality Management
AACSB: Analytic Skills
82) Successful Total Quality Management (TQM) requires leadership from the top.
Topic: Total Quality Management
AACSB: Analytic Skills
83) In today’s competitive marketplace, an entrepreneur should not expect that every vendor be
able to demonstrate that they operate a continuous improvement process.
Topic: Vendor Certification
AACSB: Analytic Skills
20