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INSTRUCTIONS FOR CANDIDATESThis examination has FOUR compulsory questions worth 25 marks each.
1. Do not open this booklet until instructed by the invigilator.
2. Before you begin, check your candidate number and unit title is correct at the top of this answer booklet. Your name must not appear anywhere on this answer booklet.
3. Write your answer to each question in the space provided.
4. If you require extra paper, you should request it from the invigilator. Ensure you write your candidate number and the question number clearly on each sheet of continuation paper used.
5. All answers must be written in blue or black ink including diagrams
6. This booklet must remain intact. Do not remove any pages. Cross out any work you do not wish to be marked.
7. At the end of the examination, hand this booklet to the invigilator.
AS03
AC3/November 2016
Advanced certificate in procurement and supply operations
Procurement and supply workflow
Official use only
Question Marks Awarded Invigilator’s Use Only
Please mark with an ‘A’ if the candidate is absent
from this examination
Q1
Q2
Q3
Q4
Total
Candidate Number
Date Wednesday 16 November 2016
Time Start 09:30 End 11:30 Duration 2 hours
Centre Event
QUESTION AND ANSWER BOOKLET
Page 3 of 20 AC3 Exam Questions November 2016
SECTION 1
Write your answers in the spaces provided. You are advised to spend 30 minutes on this question.
Q1 The Quick Food Group (QFG) manufactures a range of convenience food products in a number of manufacturing facilities around the world. QFG is developing a new health-based product which will be launched onto the market next year.
Jonathan Beale works in the procurement department at QFG and has responsibility for the procurement of marketing events and services. Jonathan has had quality and delivery problems with both of his current events suppliers. He wishes to issue a request for information (RFI) in order to gather information on the suitability of other potential suppliers for the launch of the new product next year.
Jonathan has identified a number of new potential suppliers and has developed a list of information requirements.
(a) Explain why Jonathan’s RFI might request the following THREE types of information from potential suppliers. (6 marks)
Type of information requested Explanation of why included in the RFI(2 marks each)
1. Financial information for the last three years
2. Examples of current customers and types of project
3. Details of standards and certifications held
PLEASE TURN OVER
Page 4 of 20 AC3 Exam Questions November 2016
(b) Jonathan intends to use the results of the RFI to short-list suitable suppliers to receive a request for quotation (RFQ). Explain the purpose of an RFQ. (3 marks)
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(c) Once Jonathan has received quotations from the short-listed suppliers he will need to analyse and compare them. There will be a range of factors apart from basic price to be considered when evaluating the supplier quotations.
Identify FOUR factors other than basic price that Jonathan might consider when evaluating the supplier quotations, and provide an example for each. (8 marks)
Quotation evaluation factor (1 mark each) Example (1 mark each)
1.
2.
3.
4.
Page 5 of 20 AC3 Exam Questions November 2016
(d) Once a supplier has been selected a contract will be put in place between QFG and the chosen supplier. Below are FOUR statements relating to interpreting contract terms. For each statement, identify if it is true or false and provide an explanation for your answer. (8 marks)
Statement 1 If it is argued that there has been a mutual mistake of the contracting parties, they cannot
amend or reform the contract. _____________________________________________________________________________
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Statement 2 The court will generally adopt a subjective approach, which may not be based on the intentions
of reasonable persons.
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Statement 3 If there is a conflict between general contract conditions and special conditions added by the
parties, the latter will prevail.
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Statement 4 Where a contract does not fix a time for the performance of any contractual obligation, the law
implies that it shall be performed in a reasonable time.
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PLEASE TURN OVER
Page 6 of 20 AC3 Exam Questions November 2016
SECTION 2
Write your answers in the spaces provided. You are advised to spend 30 minutes on this question.
Q2 Jess Grant is a trainee buyer at Greenway Limited, a manufacturer of sustainable furniture and household accessories. Jess’ manager has asked her to explain the process of budgeting to a group of new business apprentices. Unfortunately, the printer is not working properly and the notes that have been provided to Jess have a number of words missing.
(a) Using the correct words or phrases from the glossary in Fig 1, fill in the missing words in the following statement relating to the budgeting process. (8 marks)
Glossary
materials purchasing budgetbusiness plan
capital expenditurefinance department
creditors
cash-flowproduction budget
periodic basisallocate resources
master budget
Fig 1
The Statement of Budgeting Process
The Budgeting Process
Greenway Limited has developed a _______________________ which describes its key
activities, markets and objectives. An important factor within its development was the
management of budgets. At Greenway, budgeting is done on a _______________________
and is a very effective way to control _______________________ and ensure that
_______________________ can be paid when due.
There are a number of different types of budget at Greenway including the
_______________________ , which covers the proposed quantity and flow of stock, and the
_______________________ , which covers the amount of raw materials and components
needed to manufacture the necessary number of units. Also, the _______________________
budget covers the purchase of assets such as buildings and equipment. All these individual
budgets come together to create the _______________________ .
Page 7 of 20 AC3 Exam Questions November 2016
Greenway Limited is a relatively new company and the procurement processes and documents are still being developed. Jess is part of a working group with responsibility for developing a purchase order template.
The working group is required to develop a list of headings for the fields of information on the purchase order.
(b) Identify FIVE fields of information that might be included on a purchase order and explain why each one should be included. (10 marks)
Field of information (1 mark each) Explanation of why included (1 mark each)
1.
2.
3.
4.
5.
PLEASE TURN OVER
Page 8 of 20 AC3 Exam Questions November 2016
(c) The procurement team at Greenway Limited has also been investigating the use of purchasing cards for some low-value purchases.
(i) Explain the term ‘purchasing card’. (3 marks)
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(ii) Suggest TWO benefits for Greenway Limited of using purchasing cards for low-value purchases.
Benefit 1 (2 marks)
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Benefit 2 (2 marks)
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Page 9 of 20 AC3 Exam Questions November 2016
SECTION 3
Write your answers in the spaces provided. You are advised to spend 30 minutes on this question.
Q3 Pet Haven is a boarding service for small family pets such as rabbits, guinea pigs, hamsters and chickens. Customers bring their pets to stay at Pet Haven while away on holiday for periods ranging generally from one night to three weeks. Pet Haven provides indoor or outdoor accommodation, bedding, food and water, and cleaning services at a cost of £5.00 per night for each pet. Pet Haven can accommodate 60 pets in total per night and the boarding facility is open 365 days per year.
Jem Parker, the owner of Pet Haven, is concerned about the financial performance of the business and has decided to analyse his direct and indirect costs.
(a) Provide an explanation of the terms ‘direct costs’ and ‘indirect costs’ below. Use examples from Pet Haven to support your answers.
(i) Direct costs (3 marks)
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(ii) Indirect costs (3 marks)
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PLEASE TURN OVER
Page 10 of 20 AC3 Exam Questions November 2016
(b) Jem has collected the information on Pet Haven’s costs and sales in Fig 2 in order to conduct a breakeven analysis.
Projected sales volumes 20 units 40 units 60 units
(£) (£) (£)
Fixed costs (per night) 100.00 100.00 100.00
Variable costs @ £2.00 per unit 40.00 80.00 120.00
Total costs 140.00 180.00 220.00
Sales revenue @ £5.00 per unit 100.00 200.00 300.00
(Loss)/profit per night (40.00) 20.00 80.00
Fig 2 Cost by sales volume
(i) Draw a line graph showing the fixed costs, total costs and sales revenue using the information in Fig 2. (6 marks)
300
200
100
0
(£)
10 20 30 40 50 60Sales Volume (units per night)
Page 11 of 20 AC3 Exam Questions November 2016
(ii) Identify the breakeven point on the graph and calculate the breakeven value, rounding the answer up to the nearest whole number of pets per night. (4 marks)
(c) Jem is also concerned about the financial stability of his rabbit and guinea pig food supplier. Explain how he might use the following sources of financial information to gain a better understanding of his supplier’s financial position. (6 marks)
Source of supplier financial information
Explanation of use in understanding supplier’sfinancial position (2 marks each)
1. Profit and loss account statements
2. Credit rating report
3. Ratio analysis
PLEASE TURN OVER
Page 12 of 20 AC3 Exam Questions November 2016
(d) Jem has already set the sales budget for the next financial year at £50,000. Pet Haven is open 365 days per year, and therefore incurs £36,500 of fixed costs. Using the information in Fig 2, discuss whether the business will make a profit or a loss if annual sales revenue is £50,000.
(3 marks)
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Page 13 of 20 AC3 Exam Questions November 2016
SECTION 4
Write your answers in the spaces provided. You are advised to spend 30 minutes on this question.
Q4 BuyTogether is a procurement organisation providing procurement services to public sector customers such as schools, local council offices and care homes.
Each of the procurement staff at BuyTogether has a set of performance objectives which includes an objective to provide effective customer service through the ‘service mix’ or ‘3 Ps’ – people, process and physicals.
(a) Explain the role of each of the ‘3 Ps’ of the ‘service mix’ in the delivery of procurement services. (9 marks)
3 Ps Role in the delivery of procurement services (3 marks each)
1. People
2. Processes
3. Physicals
PLEASE TURN OVER
Page 14 of 20 AC3 Exam Questions November 2016
(b) When communicating with stakeholders, the procurement function at BuyTogether uses either formal or informal communication methods, as appropriate, or a combination of them to ensure that stakeholders are well informed.
The communications at BuyTogether may also be in a number of different directions: upward, downward or horizontal.
Finally, the communication methods used by BuyTogether may include written reports, surveys, e-mail, networking, use of the ‘grapevine’, and electronic means such as chat, intranet and web conferencing.
Task
For the FOUR scenarios outlined below, you are required to:
Identify in each case whether formal or informal communication is appropriate; secondly, suggest whether the communication is mainly upward, downward or horizontal; and thirdly, explain the most appropriate method of communication that could be used. (8 marks)
Scenario Formal or informal communication, direction and most appropriatecommunication method (up to 2 marks each)
1. Cascade ofindividualperformanceobjectives
2. Cross-functionalsharing ofdepartmentalobjectives andtargets
3. Gathering feedbackfrom internal customers prior topublicising plans orstrategies
4. Establishing thegeneral level ofmotivation and jobsatisfaction within theprocurement function
Page 15 of 20 AC3 Exam Questions November 2016
(c) Explain how the following technologies might support effective communications for the procurement function at BuyTogether.
(i) Intranet (4 marks)
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(ii) Messaging technology (4 marks)
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END OF QUESTION PAPER AND ANSWER BOOKLET
Page 20 of 20 AC3 Exam Questions November 2016
PLEASE RETURN TO:
CIPS ASSESSMENT MANAGEMENT CENTRE
c/o LINNEY DIRECT, A2 GOODS IN
BELLAMY ROAD, MANSFIELD
NOTTINGHAMSHIRE NG18 4LN
UNITED KINGDOM
TEL: +44(0) 845 880 1188
FAX: +44(0) 845 880 1187
www.cips.org
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