Deck 15: Managing Suppliers and Customers

Question 1

Which of the following terms relate to e-commerce?
I) B2B
Ii) C2B
Iii) B2C
Iv) EDI

A) i, ii and iii
B) ii, iii and iv
C) i, ii and iv
D) i, iii and iv

Answer 1

D

Question 2

An example of an ordering cost is:

A) security.
B) time spent finding suppliers.
C) idle workers.
D) costs of disrupted production.

Answer 2

B

Question 3

What kind of costs are transportation and receiving costs?

A) Ordering costs
B) Shortage costs
C) Carrying costs
D) Production costs

Answer 3

A

Question 4

Which of the following are examples of inventory holding costs?
I) Inwards inspection
Ii) Rental
Iii) Opportunity cost
Iv) Insurance

A) i, ii and iii
B) ii, iii and iv
C) i, ii and iv
D) i, iii and iv

Question 5

The economic order quantity model:

A) determines ordering costs.
B) determines total costs involved in holding inventory.
C) is a mathematical tool for determining the order quantity that minimises the costs of ordering and holding inventory.
D) is a mathematical tool for determining shortage and ordering costs.

Question 6

Specialty Manufacturing requires 5400 gadgets per year for production. The firm decides to order 120 gadgets at a time. The costs of ordering are $50 per order and carrying costs per gadget are $2. Annual ordering costs are:

A) $1296.
B) $2250.
C) $2940.
D) $2000.

Question 7

An example of a carrying cost is:

A) warehouse security.
B) time spent finding suppliers.
C) additional machinery set-ups.
D) transportation costs.

Question 8

An example of a shortage cost is:

A) time spent finding suppliers.
B) idle workers.
C) transportation costs.
D) foregone interest on working capital.

Question 9

Which of the following activities does B2B include?
I) Purchasing and procurement
Ii) Customer service
Iii) Supplier management
Iv) Inventory management

A) i, ii and iii
B) ii, iii and iv
C) i, ii and iv
D) All of the given answers

Question 10

Which of the following are examples of delivery costs?
I) Receiving
Ii) Inwards inspection
Iii) Opportunity cost

A) i and ii
B) ii and iii
C) All of the given answers
D) None of the given answers

Question 11

Which of the following are performance measures used by firms to assess their own performance in relation to suppliers?
I) Percentage of orders processed by electronic means
Ii) Number of expedited orders
Iii) Response time to customer queries
Iv) Reduction in the number of suppliers

A) i, ii and iii
B) ii, iii and iv
C) i, ii and iv
D) All of the given answers

Question 12

Which of the following is a supplier cost?
I) Inwards inspection
Ii) Outwards inspection
Iii) Expediting raw material deliveries

A) i and ii
B) i and iii
C) ii and iii
D) All of the given answers

Question 13

Specialty Manufacturing requires 5400 gadgets per year for production. The firm decides to order 120 gadgets at a time. The costs of ordering are $50 per order and carrying costs per gadget are $2. The annual cost of the inventory policy is:

A) $2370.
B) $1365.
C) $1584.
D) $2490.

Question 14

A valuable method of assessing supplier performance is to use a supplier performance index. This index is calculated by:

A) total purchase price $\div$ total supplier costs
B) total supplier costs $\div$ total purchase price
C) average purchase price $\div$ average supplier costs
D) average supplier costs $\div$ average purchase price

Question 15

Which of the following statements is/are correct?
I) The economic order quantity determines the optimum order size for individual inventory items.
Ii) The economic order quantity cannot be used in a manufacturing organisation.
Iii) The economic order quantity minimises the sum of the ordering and carrying costs.

A) i
B) ii
C) i and iii
D) All of the given answers

Question 16

A firm has the following stock and carrying costs:
The economic order quantity is:

A) 490 units.
B) 346 units.
C) 424 units.
D) 692 units.

Question 17

Which of the following are shortage costs?

A) Cost of disrupted production
B) Lost sales resulting in unsatisfied customers
C) Loss of quantity discounts on purchases.
D) All of the given answers

Question 18

Specialty Manufacturing requires 5400 gadgets per year for production. The firm decides to order 120 gadgets at a time. The costs of ordering are $50 per order and carrying costs per gadget are $2. Annual carrying costs are:

A) $288.
B) $240.
C) $140.
D) None of the given answers

Question 19

What types of businesses usually hold significant quantities of inventory?

A) Manufacturing and wholesale
B) Wholesale and retail
C) Manufacturing, wholesale and retail
D) Retail, manufacturing and service

Question 20

Firm A has the following information:
What is the economic order quantity for Firm A?

A) 2000
B) 3000
C) 1133
D) 1414

Question 21

The reorder point is calculated by:

A) average usage $\times$ safety stock + lead time.
B) average usage $\times$ safety stock $\times$ lead time.
C) average usage $\times$ lead time + safety stock.
D) safety stock $\times$ lead time + average usage.

Question 22

Which of the following can have a negative impact on a customer's profitability?

A) Number of required sales contacts (phone calls, visits etc.)
B) Accounts receivable collection time
C) Purchase order amendments
D) All of the given answers

Question 23

A withdrawal kanban is used in conjunction with:

A) activity-based costing.
B) facilitating quick and inexpensive set-ups of machines.
C) initiating production in a preceding production stage.
D) measuring the correlation between a cost driver and a cost pool.

Question 24

Which of the following statements about just-in-time purchasing, compared with traditional purchasing systems, is/are true?

A) Quality control by the supplier is more crucial.
B) Adherence to delivery schedules by the suppliers is more crucial.
C) Vendors can be dropped or added quickly.
D) Quality control by the supplier is more crucial AND adherence to delivery schedules by the suppliers is more crucial.

Question 25

Which of the following statements is false?

A) Just-in-time (JIT) is limited to manufacturing firms.
B) One feature of JIT production is demand-pull.
C) Downstream workstations are the driving force of JIT production.
D) JIT involves eliminating non-value-added activities.

Question 26

Under a backflush costing system, conversion costs are:

A) applied to finished goods inventory.
B) applied to manufacturing overhead only.
C) applied directly to cost of goods sold.
D) applied to finished goods inventory OR applied directly to cost of goods sold.

Question 27

Which of the following costs should be included in customer profitability analysis?
I) Product costs
Ii) Distribution
Iii) Customer servicing
Iv) Finished goods inspection costs

A) i, ii and iii
B) ii, iii and iv
C) i, iii and iv
D) i, ii and iv

Question 28

Which of the following are customer costs at the customer level?
I) Regular sales calls
Ii) Customer inquiries
Iii) Acceptance of sales order
Iv) Provision of samples to customers

A) i, ii and iii
B) i, iii and iv
C) i, ii and iv
D) All of the given answers

Question 29

James Bond Pty Ltd uses 960 tonnes of a particular chemical each year. Monthly usage fluctuates between 70 tonnes and 90 tonnes. The lead time for each order is six weeks and the economic order quantity is 160 tonnes. The safety stock for Bond's chemical would be:

A) 10 tonnes.
B) 20 tonnes.
C) 30 tonnes.
D) None of the given answers

Question 30

Which of the following statements regarding backflush costing is false?

A) Backflush costing is simpler and less expensive than traditional product costing.
B) Backflush costing provides more-detailed information than a job order costing system.
C) When using backflush costing, a cost-benefit decision needs to be made.
D) It is only likely to be used in an environment where production-related inventories are kept low.

Question 31

Which of the following is an appropriate way to analyse customer profitability?

A) The cost of servicing a customer calculated as a percentage of the customer's gross margin.
B) The cost of servicing a customer as a percentage compared to company or industry norms.
C) The cost of servicing a customer calculated as a percentage of the customer's gross margin, examined over several years.
D) All of the given answers

Question 32

Which of the following statements regarding a just-in-time (JIT) system are true?
I) Materials are purchased and goods are produced only as required.
Ii) Employees are highly skilled at single tasks in order to maintain quality control.
Iii) A JIT system is characterised by small lot sizes.

A) i and ii
B) i and iii
C) ii and iii
D) All of the given answers

Question 33

The Wonderlust Retail Company Ltd experiences relatively constant demand of 24 000 units per year for one of its products. The product, a coffee-making machine, costs the firm $30. Placing an order costs $200 and annual carrying costs are $2 per unit. The firm works 200 days per year and desires a safety stock of 300 units. The lead time for an order is 15 working days. The economic order quantity for Wonderlust is:

A) 1549.
B) 3098.
C) 2191.
D) 2221.

Question 34

Which of the following statements regarding the pull method is/are true?
I) Goods are produced in each manufacturing stage only as they are needed at the next stage.
Ii) This method reduces work-in-process inventory.
Iii) This method reduces inventory handling and its associated non-value-added cost.

A) i and ii
B) i and iii
C) ii and iii
D) All of the given answers

Question 35

Which of the following are customer costs at the market level?
I) Market research
Ii) Regular sales calls
Iii) Advertising campaigns
Iv) Market development

A) i, ii and iii
B) ii, iii and iv
C) i, iii and iv
D) All of the given answers

Question 36

A firm that uses a just-in-time purchasing philosophy probably:

A) has few suppliers.
B) has minimal inspection of purchased items at the receiving point.
C) uses an electronic data interchange (EDI) ordering system.
D) All of the given answers

Question 37

Lead time is:

A) the amount of time it takes to place an order.
B) the length of time it takes for goods to be received after an order is placed.
C) the length of time it takes for an item, in inventory, to be sold.
D) the length of time it takes to sell goods.

Question 38

Under a backflush costing system, the journal entry to purchase raw materials on account is:

A) debit work in process and credit accounts payable.
B) debit raw materials and credit cash.
C) debit raw and in-process inventory and credit accounts payable.
D) debit cost of goods sold and credit accounts payable.

Question 39

Which of the following is not an assumption underlying economic order quantity?

A) Demand is known and constant.
B) The order is delivered as needed.
C) On average one-half of inventory is in stock at any one time.
D) Acquisition cost per unit is constant.

Question 40

Artwright Graphics uses a special-purpose paper in 80 per cent of its jobs. The paper is purchased in l00-sheet packages at a cost of $100 per package. Management estimates the cost of placing and receiving a typical order to be $15 and the annual cost of carrying a package in inventory is $1.50. The firm uses 2600 packages each year and production is constant all year. The lead time to receive an order is one week. No safety stock is kept. The reorder point for the paper is:

A) 100 units.
B) 25 units.
C) 50 units.
D) 203 units.

Question 41

Select the statement that best completes the following sentence for all possible scenarios: 'Considering the entire value chain is important for management accounting in today's competitive environment because ....'

A) the value chain actually extends back to suppliers and forward to customers.
B) production is only one very small part of the value chain.
C) traditional systems have focused on the engineered costs of production rather than the discretionary costs of the other aspects of the value chain.
D) the study of all aspects and linkages in the chain may provide opportunities for cost reduction that are not evident when focusing on one aspect only.

Question 42

The production lead time may be defined as:

A) the duration of the production process.
B) time between receipt of order and when production commences.
C) time between receipt of order and completion of manufacture.
D) time between when the order is received by production and the goods being ready for delivery.

Question 43

The following dates apply to a specific order processed by Hamilton Ltd:
What is the production lead time?

A) 4 days
B) 7 days
C) 10 days
D) 11 days

Question 44

GoGo Furniture needs to purchase glass panes to make glass top coffee tables. Last year GoGo Furniture had two suppliers, BolBol and TolTol. Based on last year's experience with these two suppliers, GoGo provides you with the following supplier related information:
What is the total amount of order-level costs relating to BolBol?

A) $1050
B) $4050
C) $6300
D) $7050

Question 45

Select the best answer. Backflush costing is appropriate when:

A) both just-in-time (JIT) and activity-based costing (ABC) have been implemented.
B) JIT purchasing has been implemented.
C) both JIT production and JIT purchasing have been implemented.
D) reduced set-up times have resulted from JIT's introduction.

Question 46

GoGo Furniture needs to purchase glass panes to make glass top coffee tables. Last year GoGo Furniture has two suppliers, BolBol and TolTol. Based on last year's expernece with these two suppliers, GoGo provides you with the following supplier related information:
The supplier performance index of BolBol and TolTol are, respectively:

A) BolBol 0.30; TolTol 0.05
B) BolBol 1.20; TolTol 1.03
C) BolBol 1.30; TolTol 1.05
D) BolBol 1.51; TolTol 0.40

Question 47

The following dates apply to a specific order processed by Hamilton Ltd:
What is the waiting time?

A) 4 days
B) 7 days
C) 10 days
D) 13 days

Question 48

The following dates apply to a specific order processed by Hamilton Ltd:
What is the production time?

A) 4 days
B) 10 days
C) 13 days
D) 21 days

Question 49

Nonsuch Ltd wishes to know the break-even point on its product, ADV, and provides the following data.
What is the break-even point in years?

A) 3
B) 4
C) 5
D) 6

Question 50

The following dates apply to a specific order processed by Hamilton Ltd:
What is the customer response time?

A) 21 days
B) 7 days
C) 10 days
D) 13 days

Question 51

The analysis of the cost of products purchased and associated customer driven costs is known as:

A) customer profitability analysis.
B) supplier cost analysis.
C) customer cost analysis.
D) product contribution analysis.

Question 52

The break-even time has which of the following characteristics?
I) It cannot be established until after the product development cycle is completed.
Ii) It encourages incremental projects.
Iii) It discourages major projects that take a long time.
Iv) It measures cash flow not profit.

A) i, ii and iii
B) ii, iii and iv
C) i, iii and iv
D) All of the given answers

Question 53

The following dates apply to a specific order processed by Hamilton Ltd:
What is the order receipt time?

A) 4 days
B) 7 days
C) 13 days
D) 21 days

Question 54

Customer response time may be defined as:

A) time between receipt of the customer order and placing that order in production.
B) time between customer placing an order and customer receiving the completed order.
C) time between receipt of order and delivery to customer.
D) time between receipt of order and production commencing.

Question 55

Customer value is an important part of activity-based management and it enables an organisation to achieve both cost reduction and improved customer value through the use of which of the following?
I) Identifying major opportunities for cost reduction.
Ii) Determining root causes of these costs.
Iii) Developing programs to eliminate the causes of these costs.
Iv) Introducing performance measures to monitor the effect of these programs.

A) i, ii and iv
B) i, ii and iii
C) ii, iii and iv
D) All the given answers

Question 56

Average cycle time is estimated by:

A) production time $\div$ value of goods produced.
B) total processing time $\div$ total number of units produced.
C) total processing time $\div$ number of good units produced.
D) number of good units produced $\div$ total processing time.

Question 57

The reason a just-in-time system focuses on the control of inventories is because:

A) they drive production lead times.
B) they are an expensive capital item for most firms.
C) they are what customers want.
D) they have non-value-added characteristics.

Question 58

Break-even time may be defined as:

A) the time from commencement of production of a new product to the point where sufficient profit has been generated to repay the original investment.
B) the time from the original concept to the point where sufficient profit has been generated to repay the original investment.
C) the time from the first delivery to a customer of a new product to the point where sufficient profit has been generated to repay the original investment.
D) None of the given answers

Question 59

GoGo Furniture needs to purchase glass panes to make glass top coffee tables. Last year GoGo Furniture has two suppliers, BolBol and TolTol. Based on last year's experience with these two suppliers, GoGo provides you with the following supplier related information:
The total costs of ownership of BolBol and TolTol are, respectively:

A) BolBol $10 050; TolTol $4050
B) BolBol $15 050; TolTol $6050
C) BolBol $50 300; TolTol $120 600
D) BolBol $65 050; TolTol $126 050

Question 60

Time-based management is concerned with the elimination of idle time, which generates non-value-added costs in which of the following circumstances?

A) The buildup of inventories
B) Loss of customers
C) Delay in sales revenue generation
D) All of the given answers

Question 61

Which of the following is a likely cause for a longer-than-expected production lead time?

A) The order was received later than expected.
B) The delivery truck has broken down on the way to the customer.
C) The order was lost after the customer sent it to the company.
D) There was excessive idle time in the production process.

Question 62

The activity where there is an additional cost incurred by a buying firm as the result of a quality problem is known as:

A) a supplier level activity.
B) an order level activity.
C) a unit level activity.
D) an organisation level activity.

Question 63

If time is not managed efficiently by companies, costs relating to a build-up of inventories and the rate at which products are produced can get out of control.

Question 64

If the total supplier activity costs were $74 000; price per unit was $1.70; and total units purchased were 12 000, the supplier performance index would be:

A) 6.166.
B) 10.483.
C) 5.223.
D) 3.627.

Question 65

Which of the following set of measures are appropriate in monitoring 'customer retention'?

A) Proportion of sales from existing customers, number of repeat purchases, sales growth from customers using loyalty cards
B) Customer satisfaction rating, number of repeat purchases, customer acquisition costs
C) Customer satisfaction rating, sales growth from customers using loyalty cards, customer profitability per quarter
D) Proportion of sales from existing customers, market share, profit attributable to customers in the 21-30 age group

Question 66

Doron Ltd has just computed the supplier performance index (SPI) of the company's two suppliers, Xema and Zetta. Xema's SPI is 2.11 and Zetta's SPI is 0.99. Which of the following statements is correct?

A) Xema is a preferred supplier because it has a higher SPI than Zetta.
B) Xema is a preferred supplier because its SPI is greater than 1.0.
C) Both suppliers are considered poor quality suppliers, because their SPI is higher than 0.50.
D) The SPI indices suggest that for every $1 purchase price, Doron has to incur $2.11 supplier activity costs for Xema and $0.99 activity costs for Zetta.

Question 67

When selecting new suppliers, which of the following would not be part of the selection criteria?

A) Supplier performance history
B) Cheapest price
C) Communication systems
D) Geographical location

Question 68

The advantage of a just-in-time (JIT) system is that there are huge savings in costs relating to the holding of inventory as JIT companies never hold inventories of any description.

Question 69

GoGo Furniture has collected the following customer-related information:
The total order level cost is:

A) $6000
B) $16 000
C) $24 500
D) $29 000

Question 70

A firm is likely to develop collaborative relationships with suppliers to help minimise supplier and inventory-related costs when the strategic focus of the firm is:

A) growth leadership.
B) differentiation strategy.
C) segmentation strategy.
D) cost leadership.

Question 71

Explain why calculating customer profitability assists in the management of customer-driven costs.

Question 72

GoGo Furniture has collected the following customer-related information:
The total market level cost is:

A) $8500
B) $17 000
C) $21 500
D) $27 000

Question 73

The core customer measure at which an organisation attracts and wins new customers is known as customer:

A) acquisition.
B) satisfaction.
C) retention.
D) profitability.

Question 74

Explain the three levels of supplier activities and costs that are incurred by an organisation.

Question 75

Explain how 'collaborative relationships' with suppliers are essential when the strategic focus of a firm is cost leadership.

Question 76

A customer has placed an order with Cyborg Computers for a custom-made computer. However, as a result of a system error, the order was lost. It took the sales representative three days to locate the order again. Once the order was located, the sales representative sent the order to the production department. This error is likely to negatively affect which of the following?

A) Production lead time and delivery time
B) Customer response time and order receipt time
C) Customer response time and delivery time
D) Order receipt time and delivery time

Question 77

GoGo Furniture has collected the following customer-related information:
The total customer level cost is:

A) $8500
B) $18 500
C) $30 500
D) $35 500

Question 78

Highlight three approaches that illustrate how the growing use of e-commerce has had a major impact on the design of business processes and accounting systems.

Question 79

A formal agreement between organisations with the intention to share resources is known as a:

A) collaborative arrangement.
B) mutual agreement.
C) strategic alliance.
D) common objective.

Question 80

Identify and define the five core customer measures. To support your answer, provide an example for each core measure.