K180-pro - Procurement Reports - Product Knowledge

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Please complete the following self-assessment quiz - Test your own knowledge but if necessary please refer back to the training materials, manuals and/or other relevant resources to complete the questions

• 1.

Which definition below best describes the calculation of the percentage figure used for the 3-year price recent trend?

• A.

The lowest annual growth rate or decline over the 3 year period

• B.

The average annual growth rate or decline over the 3 year period

• C.

The highest annual growth rate or decline over the 3 year period

B. The average annual growth rate or decline over the 3 year period
Explanation
The calculation of the percentage figure used for the 3-year price recent trend is best described by the average annual growth rate or decline over the 3 year period. This means that the percentage figure represents the average rate at which the price has either grown or declined over the span of three years.

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• 2.

A recent price trend for a product that is calculated as 5% over the past 3 years (CAGR) is considered good for the buyer. True or False?

• A.

True

• B.

False

B. False
Explanation
A recent price trend for a product that is calculated as 5% over the past 3 years (CAGR) is not considered good for the buyer. A CAGR of 5% indicates that the price of the product has been increasing steadily over the past three years. This means that the buyer would have to pay more for the product compared to previous years, which is not favorable for them. Therefore, the statement is false.

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• 3.

The Price Fundamentals section includes a summary table list 3 key pricing elements that are discussed in greater detail in this section. Which options below are the 3 elements?

• A.

Average Price (or Benchmark Price)

• B.

Price Range

• C.

Price Volatility

• D.

Key Pricing Factors

• E.

Price Forecast

A. Average Price (or Benchmark Price)
B. Price Range
D. Key Pricing Factors
Explanation
The Price Fundamentals section provides a summary table that lists three key pricing elements. These elements are the Average Price (or Benchmark Price), Price Range, and Key Pricing Factors. The Average Price (or Benchmark Price) refers to the average or standard price of a product or service. The Price Range indicates the range of prices within which the product or service is sold. Key Pricing Factors are the factors that influence the pricing of a product or service, such as production costs, demand, and competition.

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• 4.

Below are examples of potential Input Cost Drivers and External Demand Drivers that could appear in the Catering Services report. Check mark all of the Input Cost Drivers, and leave the External Demand Drivers blank.

• A.

Consumer Spending

• B.

Average wages - Caterers

• C.

The price of red meat

• D.

• E.

Corporate Profit

B. Average wages - Caterers
C. The price of red meat
Explanation
The correct answer is "Average wages - Caterers" and "The price of red meat". These two factors, average wages for caterers and the price of red meat, are examples of input cost drivers. Input cost drivers refer to factors that directly affect the cost of producing a product or service. In this case, the wages of caterers and the price of red meat are both inputs that contribute to the overall cost of providing catering services.

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• 5.

If the Recent Price Volatility is measured as LOW for a product, then this is good for the buyer. True or False?

• A.

True

• B.

False

A. True
Explanation
If the Recent Price Volatility is measured as LOW for a product, it means that the price of the product has been relatively stable and has not experienced significant fluctuations in the recent past. This is good for the buyer because it provides them with more certainty and predictability in terms of the price they will pay for the product. They can plan their budget accordingly and avoid unexpected price increases. Therefore, the statement "If the Recent Price Volatility is measured as LOW for a product, then this is good for the buyer" is true.

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• 6.

Profit, Wages, Purchases and Overheads are all listed in the Cost Structure table - Which category would "depreciation costs" be listed under?

• A.

Profit

• B.

Wages

• C.

Purchases

• D.

Explanation
Depreciation costs would be listed under the "Overheads" category in the Cost Structure table. Overheads typically include all the indirect expenses incurred in running a business, such as rent, utilities, insurance, and depreciation. Depreciation costs are associated with the wear and tear or obsolescence of assets used in the business, and they are considered as a part of the overall overhead expenses.

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• 7.

What stage of a product's life cycle is generally a greater risk for the Buyer; a product that is in the "Growth" stage or a product that is in the "Mature" stage of its life cycle?

• A.

Growth

• B.

Mature

A. Growth
Explanation
The stage of a product's life cycle that is generally a greater risk for the buyer is the "Growth" stage. During this stage, the product is experiencing rapid market acceptance and increasing sales. However, there are still uncertainties and risks associated with the product's performance, competition, and market demand. The buyer may face challenges such as potential defects, limited product availability, and higher prices due to high demand. In contrast, the "Mature" stage is characterized by a stable market and established product performance, making it a lower-risk stage for the buyer.

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• 8.

The Life Cycle stage of a product impacts 4 key factors; select the factors that are affected and discussed within the section of the report.

• A.

Pricing Trend

• B.

Total Cost of Ownership

• C.

Product/Technology Changes

• D.

Marketing Trends

• E.

Distribution Scope

• F.

Negotiation Questions

A. Pricing Trend
C. Product/Technology Changes
D. Marketing Trends
E. Distribution Scope
Explanation
The life cycle stage of a product impacts the pricing trend, product/technology changes, marketing trends, and distribution scope. These factors are discussed within the section of the report. The pricing trend is influenced by the life cycle stage as the product may experience price reductions or increases depending on its position in the market. Product/technology changes are necessary to keep the product relevant and competitive as it progresses through different stages. Marketing trends need to be adapted to effectively target customers at each stage of the life cycle. Distribution scope may expand or contract as the product reaches different markets.

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• 9.

If a product has a "High" Total Cost of Ownership, then which statement is true?

• A.

The TCO as a percentage of the benchmark price per year is at least 100%

• B.

The TCO as a percentage of the benchmark price per year is at least 200%

• C.

The TCO as a percentage of the benchmark price per year is at least 50%

A. The TCO as a percentage of the benchmark price per year is at least 100%
Explanation
If a product has a "High" Total Cost of Ownership, it means that the overall cost of owning and maintaining the product over its lifetime is significant. Therefore, the statement "The TCO as a percentage of the benchmark price per year is at least 100%" is true. This means that the annual cost of ownership is equal to or greater than the benchmark price of the product itself.

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• 10.

If the Product Specialization for a product is measured as HIGH then generally this is positive for the buyer. True or False?

• A.

True

• B.

False

B. False
Explanation
If the Product Specialization for a product is measured as HIGH, it means that the product is highly specialized and tailored to specific needs or requirements. This can be seen as a negative factor for the buyer because highly specialized products are often more expensive and may have limited availability. Additionally, high product specialization may also mean that the buyer has limited options or alternatives to choose from, reducing their flexibility in finding the best product for their needs. Therefore, the statement "If the Product Specialization for a product is measured as HIGH then generally this is positive for the buyer" is false.

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• 11.

The products listed below are considered either a "Related Good" or a "Substitute Good" for Business Card Printing Services. Mark all that would be considered a "Related Good".

• A.

Stationary

• B.

Office Supplies

• C.

• D.

• E.

Printed Marketing Material

A. Stationary
B. Office Supplies
E. Printed Marketing Material
Explanation
Stationary, office supplies, and printed marketing material can be considered "related goods" for business card printing services because they are all commonly used in a business setting and may be purchased together or used in conjunction with each other. These items are often used in the same context and can be seen as complementary to business card printing services.

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• 12.

If the Substitute Goods for a product is measured as HIGH then generally this is positive for the Buyer. True or False?

• A.

True

• B.

False

A. True
Explanation
When the substitute goods for a product are measured as high, it means that there are many alternative products available in the market that can serve as replacements for the original product. This gives the buyer more options and leverage in terms of negotiating prices and quality. With a high availability of substitute goods, buyers have the power to choose the best option that suits their needs, which is generally positive for them. Therefore, the statement "If the Substitute Goods for a product is measured as HIGH then generally this is positive for the Buyer" is true.

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• 13.

A product that is undergoing a lot of regulation change is generally good for buyers. True or False?

• A.

True

• B.

False

B. False
Explanation
False. A product that is undergoing a lot of regulation change is generally not good for buyers. Frequent regulation changes can create uncertainty and instability in the market, making it difficult for buyers to make informed decisions. It can also lead to higher prices and limited choices as businesses adjust to new regulations. Therefore, a stable and predictable regulatory environment is often preferred by buyers.

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• 14.

A product's industry that has not had any regulation changes for the last 3 years (or any expected changes for the next three years) is generally good for buyers. True or False?

• A.

True

• B.

False

A. True
Explanation
If a product's industry has not experienced any regulation changes in the past three years, or there are no expected changes in the next three years, it is generally good for buyers. This is because stable regulations provide a predictable and consistent environment for buyers, allowing them to make informed decisions without worrying about sudden changes in rules or requirements. It also suggests that the industry is well-established and does not require frequent adjustments, which can be seen as a positive sign for buyers.

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• 15.

Which of the following attributes would not be discussed as a Key Quality Factor?

• A.

Accuracy

• B.

Reliability

• C.

Price

• D.

Level of Service

C. Price
Explanation
The attribute "Price" would not be discussed as a Key Quality Factor because price is not directly related to the quality of a product or service. Key Quality Factors typically refer to attributes that determine the overall performance, reliability, and effectiveness of a product or service. While price can be an important factor for consumers, it is not considered a measure of quality in itself.

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• 16.

The Imports section of our reports is typically only relevant for services, not products. True or False?

• A.

True

• B.

False

B. False
Explanation
The statement suggests that the Imports section of reports is not only relevant for services but also for products. This means that the Imports section provides information about both services and products, contradicting the initial claim that it is only relevant for services. Therefore, the correct answer is False.

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• 17.

If the market share concentration for a particular industry is measured as HIGH, then what percentage of market share do the TOP 4 players in the market hold?

• A.

Less than 35%

• B.

At least 35%

• C.

50% or greater

• D.

Less than 50%

C. 50% or greater
Explanation
If the market share concentration for a particular industry is measured as HIGH, it means that there is a significant concentration of market share among a few players. Therefore, the TOP 4 players in the market must hold a substantial percentage of the market share, which is 50% or greater.

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• 18.

In the Vendor Statistic table the "Financial Risk Level" for each supplier (where available) is given as High, Medium or Low; the measure reflects a company's risk of bankruptcy over the next two years. What is the name of the standard measuring tool used to help measure this risk?

• A.

Moody's Investors Service's ratings

• B.

D&B Viability Rating

• C.

Altman Z-Score

C. Altman Z-Score
Explanation
Altman Z-Score is the name of the standard measuring tool used to help measure the financial risk level of a company. It is a formula developed by Edward Altman in the 1960s, which takes into account various financial ratios to assess the likelihood of a company going bankrupt within the next two years. The Z-Score combines multiple financial indicators such as profitability, leverage, liquidity, solvency, and market value to provide a comprehensive risk assessment.

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• 19.

Market Profitability is measured as High, Medium or Low for a given product or service. Buyers reading this section should be able to gain the following insight except for one statement; which statement is not true?

• A.

What is the average profitability for the relevant suppliers?

• B.

What is driving profitability for suppliers of this product?

• C.

Where do mark-ups occur in the supply chain?

• D.

What is the % weighting for each key profit driver?

D. What is the % weighting for each key profit driver?
Explanation
The question asks for the statement that is not true. The other three statements are all valid insights that buyers can gain from reading the Market Profitability section. However, the statement "What is the % weighting for each key profit driver?" is not a valid insight that can be gained from this section.

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• 20.

The higher the switching costs, the more leverage the Supplier has. True or False?

• A.

True

• B.

False

A. True
Explanation
The statement is true because switching costs refer to the expenses or difficulties a buyer may face when changing from one supplier to another. When switching costs are higher, it becomes more challenging for the buyer to switch suppliers, giving the current supplier more leverage in negotiations. This leverage can be used to maintain higher prices or negotiate more favorable terms, ultimately benefiting the supplier.

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• 21.

Buying Lead Time is measured in terms of Short, Medium and Long and is the time that the Buyer can typically anticipate between the RFP creation and what?

• A.

The beginning of negotiations

• B.

Final supplier selection

• C.

Delivery or Implementation

• D.

The end of a product's lifespan or the completion of a service contract

C. Delivery or Implementation
Explanation
Buying Lead Time is the time that the buyer can typically anticipate between the RFP creation and the delivery or implementation of the product or service. It measures the time it takes for the buyer to receive the purchased goods or for the service to be implemented. This includes all the processes involved, such as negotiations, supplier selection, and any other necessary steps before the delivery or implementation occurs.

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• 22.

Which is NOT one of the three types of Selection Processes that exists for indirect purchases within an organization?

• A.

Centralized

• B.

Decentralized

• C.

Institutionalized

• D.

Mixed

C. Institutionalized
Explanation
The correct answer is "Institutionalized" because it is not one of the three types of selection processes for indirect purchases within an organization. The three types are centralized, decentralized, and mixed. Institutionalized does not fit into any of these categories and is therefore not one of the three types of selection processes.

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• 23.

The Buying-Decision Scorecard assigns weightings across what two categories?

• A.

Technical Factors

• B.

Quality Factors

• C.

Cost Factors

• D.

Supplier Size

A. Technical Factors
C. Cost Factors
Explanation
The Buying-Decision Scorecard assigns weightings across Technical Factors and Cost Factors. This means that when making a buying decision, the scorecard takes into consideration the technical aspects of the product or service being purchased, such as its functionality, performance, and compatibility. It also considers the cost factors, including the price, ongoing expenses, and potential return on investment. By assigning weightings to these two categories, the scorecard helps prioritize and evaluate different options based on their technical capabilities and cost implications.

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• 24.

The Buyer Power Score is a calculation based on weighted quantitative and qualitative factors. Which of the following statements about the weightings attributed to the following components of the Buyer Power Score is correct.

• A.

Price Trend 40% - Market Structure – 30% - Market Risk 30%

• B.

Price Trend 50% - Market Structure – 30% - Market Risk 20%

• C.

Price Trend 50% - Market Structure – 20% - Market Risk 30%

• D.

Price Trend 40% - Market Structure – 40% - Market Risk 20%

C. Price Trend 50% - Market Structure – 20% - Market Risk 30%
Explanation
The correct answer is Price Trend 50% - Market Structure – 20% - Market Risk 30%. This means that the weightings attributed to the components of the Buyer Power Score are 50% for Price Trend, 20% for Market Structure, and 30% for Market Risk.

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• 25.

The following are the Buyer Power Score factors. Each major BPS component is categorized under one of the following: Buyer Price Trend, Market Structure or Market Risk. Check all of the factors that fall under the Buyer Price Trend.

• A.

Vendor Financial Risk

• B.

Price Driver Volatility

• C.

Switching Costs

• D.

Recent Price Trend

• E.

Recent Price Volatility

• F.

Availability of Substitutes

• G.

Forecast Price

• H.

Product Specialization

• I.

Market Share Concentration

• J.

Supply Chain Risk

D. Recent Price Trend
G. Forecast Price
Explanation
The factors "Recent Price Trend" and "Forecast Price" fall under the Buyer Price Trend category because they both directly relate to the pricing aspect of the buyer's power. The recent price trend indicates the direction in which the prices of products or services have been moving, giving buyers an idea of whether prices are increasing or decreasing. The forecast price provides buyers with an estimate of future prices, allowing them to plan and make decisions based on expected pricing changes. Both factors are important for buyers to assess and negotiate prices effectively.

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• 26.

The following are the Buyer Power Score factors. Each major BPS component is categorized under one of the following: Buyer Price Trend, Market Structure or Market Risk. Check all of the factors that fall under the Market Structure.

• A.

Vendor Financial Risk

• B.

Price Driver Volatility

• C.

Switching Costs

• D.

Recent Price Trend

• E.

Recent Price Volatility

• F.

Availability of Substitutes

• G.

Forecast Price

• H.

Product Specialization

• I.

Market Share Concentration

• J.

Supply Chain Risk

C. Switching Costs
F. Availability of Substitutes
H. Product Specialization
I. Market Share Concentration
• 27.

The following are the Buyer Power Score factors. Each major BPS component is categorized under one of the following: Buyer Price Trend, Market Structure or Market Risk. Check all of the factors that fall under the Market Risk.

• A.

Vendor Financial Risk

• B.

Price Driver Volatility

• C.

Switching Costs

• D.

Recent Price Trend

• E.

Recent Price Volatility

• F.

Availability of Substitutes

• G.

Forecast Price

• H.

Product Specialization

• I.

Market Share Concentration

• J.

Supply Chain Risk

A. Vendor Financial Risk
B. Price Driver Volatility
E. Recent Price Volatility
J. Supply Chain Risk
Explanation
The factors that fall under Market Risk are Vendor Financial Risk, Price Driver Volatility, Recent Price Volatility, and Supply Chain Risk. These factors are considered to be part of the market risk category because they indicate the potential risks and uncertainties associated with the market, such as the financial stability of vendors, the volatility of prices and demand drivers, and the risk of disruptions in the supply chain.

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• Current Version
• Mar 21, 2023
Quiz Edited by
ProProfs Editorial Team
• Dec 03, 2015
Quiz Created by
Damian Mills

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