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SCM 421 EXAM 1 (Ch. 1-6) Questions and
Correct Answers
CH.1.3 What are retail chains big enough to buy directly from
manufacturers called? Ans: National accounts
CH.1.3 What are the six processes of the SCOR model? Ans: Plan,
Source, Make, Deliver, Return, Enable
CH.1.3 Which one of the seven "rights" of purchasing is the most
important? Ans: Purchasing the RIGHT supplier
CH.1.3 (T/F) Your goal as a purchasing professional should always
be to get the lowest possible price? Ans: FALSE
CH.1.3 What is the total cost of buying, using, and disposing of an
item called? Ans: Total Cost of Ownership
CH1.4 (T/F) Purchasing has always been considered a strategic,
value-added function. Ans: FALSE
CH.1.4 During WWII, there was an increased emphasis on
purchasing's importance due to what? Ans: Material shortages
CH.1.4 What is one trend that has helped to make purchasing
more strategic? Ans: Outsourcing
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CH.1.4 What does to mean to say "organizational boundaries are
blurred" from a purchasing perspective? Ans: Suppliers provide
innovation, not just goods and services
CH.1.5 Purchase inputs make up about what % of COGS? Ans:
Purchased inputs are about 60-80% of COGS
CH.1.5 (T/F) Purchased goods and services are typically a firm's
largest cost category. Ans: TRUE
CH.1.6 (T/F) A dollar saved in purchasing nearly always has a
greater impact on profit than an additional dollar of sales revenue.
Ans: TRUE
CH.1.6 What does the profit-leverage effect measure? Ans: It
measures the amount of sales needed to have the equivalent profit
impact as a dollar of costs savings.
CH.1.6 If costs are 80% of sales (and profit is 20%), what is the
amount of extra sales needed to equal $1,500 in profit from
purchasing cost savings efforts? Ans: $7,500 ( .2 = 7500 )
CH.1.6 Where does every dollar saved in purchasing go straight to?
Ans: Net Profit
CH.1.6 What do purchasing cost reduction efforts tend to reduce?
Ans: COGS
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CH.1.7 What is the return on assets (ROA) formula? Ans: Profit
Margin x Asset Turnover
CH.1.7 What is ROA if profit margin is 5% and asset turnover is
1.7? Ans: 8.5 ( 1.7 x 5 = 8.5 )
CH.1.7 (T/F) On the strategic profit model, purchasing can only
impact operating costs and taxes. Ans: FALSE
CH.1.7 (T/F) Sales personnel have no ability to impact the strategic
profit model. Ans: FALSE
CH.1.7 What is purchasing's primary impact on the income
statement (upper) portion of the strategic profit model? Ans:
COGS
CH.1.11 Purchasers need to pay close attention to the price and
quality of which purchased inputs? Ans: Those inputs that
directly affect the customer's experience
CH.2.3 (T/F) Not all buys are created equal; you should spend
more time and effort on some purchases than others. Ans: TRUE
CH.2.3 Category is of high importance but low market complexity.
Ans: Leverage
CH.2.3 Category is of low importance but high market complexity.
Ans: Bottleneck
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SCM 421 EXAM 1 (Ch. 1-6) Questions and
Correct Answers
CH.1.3 What are retail chains big enough to buy directly from
manufacturers called? Ans: National accounts
CH.1.3 What are the six processes of the SCOR model? Ans: Plan,
Source, Make, Deliver, Return, Enable
CH.1.3 Which one of the seven "rights" of purchasing is the most
important? Ans: Purchasing the RIGHT supplier
CH.1.3 (T/F) Your goal as a purchasing professional should always
be to get the lowest possible price? Ans: FALSE
CH.1.3 What is the total cost of buying, using, and disposing of an
item called? Ans: Total Cost of Ownership
CH1.4 (T/F) Purchasing has always been considered a strategic,
value-added function. Ans: FALSE
CH.1.4 During WWII, there was an increased emphasis on
purchasing's importance due to what? Ans: Material shortages
CH.1.4 What is one trend that has helped to make purchasing
more strategic? Ans: Outsourcing
© 2025 All rights reserved
, 2 | Page
CH.1.4 What does to mean to say "organizational boundaries are
blurred" from a purchasing perspective? Ans: Suppliers provide
innovation, not just goods and services
CH.1.5 Purchase inputs make up about what % of COGS? Ans:
Purchased inputs are about 60-80% of COGS
CH.1.5 (T/F) Purchased goods and services are typically a firm's
largest cost category. Ans: TRUE
CH.1.6 (T/F) A dollar saved in purchasing nearly always has a
greater impact on profit than an additional dollar of sales revenue.
Ans: TRUE
CH.1.6 What does the profit-leverage effect measure? Ans: It
measures the amount of sales needed to have the equivalent profit
impact as a dollar of costs savings.
CH.1.6 If costs are 80% of sales (and profit is 20%), what is the
amount of extra sales needed to equal $1,500 in profit from
purchasing cost savings efforts? Ans: $7,500 ( .2 = 7500 )
CH.1.6 Where does every dollar saved in purchasing go straight to?
Ans: Net Profit
CH.1.6 What do purchasing cost reduction efforts tend to reduce?
Ans: COGS
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, 3 | Page
CH.1.7 What is the return on assets (ROA) formula? Ans: Profit
Margin x Asset Turnover
CH.1.7 What is ROA if profit margin is 5% and asset turnover is
1.7? Ans: 8.5 ( 1.7 x 5 = 8.5 )
CH.1.7 (T/F) On the strategic profit model, purchasing can only
impact operating costs and taxes. Ans: FALSE
CH.1.7 (T/F) Sales personnel have no ability to impact the strategic
profit model. Ans: FALSE
CH.1.7 What is purchasing's primary impact on the income
statement (upper) portion of the strategic profit model? Ans:
COGS
CH.1.11 Purchasers need to pay close attention to the price and
quality of which purchased inputs? Ans: Those inputs that
directly affect the customer's experience
CH.2.3 (T/F) Not all buys are created equal; you should spend
more time and effort on some purchases than others. Ans: TRUE
CH.2.3 Category is of high importance but low market complexity.
Ans: Leverage
CH.2.3 Category is of low importance but high market complexity.
Ans: Bottleneck
© 2025 All rights reserved
