CPSM EXAM 1 QUESTIONS + ANSWERS
Methods of communicating attributes of a product or service - Answer -A) Performance
& design specs - define what the product or service must do. Often used with capital
equip & services. Performance spes. gives supplier the most control over how to satisfy
the requirement. Design Specs gives buyer most control.
B) Internal vs. external specs - if not the same product will cost more.
C) Supplier samples - a physical sample can serve as the spec when it meets the
buyers needs.
Statement of Work (SOW) - Answer -Is a spec for service to be performed. Two
components. 1. defines what product must look like or do and 2. quantitative to measure
performance.
Types of solicitation bids - Answer -1. Offer to buy vs Offer to sell, 2. Informal
bid/quotation, 3. Electronic solicitations (RFx), 4. Competitive proposals, 5. Sealed bids
/ formal advertising, 6. Restricted competition, 7. Non-competitive negotiations, 8. Two
step bidding, 9. alternative/innovative proposals, 10. Pricing models / market baskets,
11. Lotting strategies (online bidding)
Request for Information (RFI) - Answer -Are information request not binding on either
party. Results are usually in the form of price list or catalogs and helps supplier in
budgeting process. Potential draw backs, is that RFI's are overused and supplier may
not respond.
Bidder's Conferences - Answer -Used for more complex biding situations and detailed
information where dialog w/ buyer and supplier are required with engineering and
supplier. Potential problems is the time it takes to conduct.
Weighted average cost of capital formula - Answer -X = Type of capital; Y = Total
Capital; Z =the interest rate (cost) or each type of capital; S=sum. Example:
Long term debt = 400K (capital type)
Preferred stock = 300K (capital type)
Total = 700K
Financing cost:
LTD: 6.2%
PS: 10.5%
Equation:
1. Debt Type/Total debt = debt type's % of debt.
2. Debt types % of debt * financing cost of debt type
3. If multiple debt types add up the sum of each from steps 1 & 2.
Sum of Years Digits Depreciation - Answer -Takes the number of years of useful life of
an asset, counts back to one, and adds the digits together. This method depreciates
more in the first few years of an asset than the others.
Methods of communicating attributes of a product or service - Answer -A) Performance
& design specs - define what the product or service must do. Often used with capital
equip & services. Performance spes. gives supplier the most control over how to satisfy
the requirement. Design Specs gives buyer most control.
B) Internal vs. external specs - if not the same product will cost more.
C) Supplier samples - a physical sample can serve as the spec when it meets the
buyers needs.
Statement of Work (SOW) - Answer -Is a spec for service to be performed. Two
components. 1. defines what product must look like or do and 2. quantitative to measure
performance.
Types of solicitation bids - Answer -1. Offer to buy vs Offer to sell, 2. Informal
bid/quotation, 3. Electronic solicitations (RFx), 4. Competitive proposals, 5. Sealed bids
/ formal advertising, 6. Restricted competition, 7. Non-competitive negotiations, 8. Two
step bidding, 9. alternative/innovative proposals, 10. Pricing models / market baskets,
11. Lotting strategies (online bidding)
Request for Information (RFI) - Answer -Are information request not binding on either
party. Results are usually in the form of price list or catalogs and helps supplier in
budgeting process. Potential draw backs, is that RFI's are overused and supplier may
not respond.
Bidder's Conferences - Answer -Used for more complex biding situations and detailed
information where dialog w/ buyer and supplier are required with engineering and
supplier. Potential problems is the time it takes to conduct.
Weighted average cost of capital formula - Answer -X = Type of capital; Y = Total
Capital; Z =the interest rate (cost) or each type of capital; S=sum. Example:
Long term debt = 400K (capital type)
Preferred stock = 300K (capital type)
Total = 700K
Financing cost:
LTD: 6.2%
PS: 10.5%
Equation:
1. Debt Type/Total debt = debt type's % of debt.
2. Debt types % of debt * financing cost of debt type
3. If multiple debt types add up the sum of each from steps 1 & 2.
Sum of Years Digits Depreciation - Answer -Takes the number of years of useful life of
an asset, counts back to one, and adds the digits together. This method depreciates
more in the first few years of an asset than the others.
