Question

1. An escalator clause provides for an increase, but not a decrease, in price if costs change.

True or False?

2. This bond guarantees work will be done according to specifications, in the time specified, and if another supplier does rework or completes the order, purchasing is indemnified for these extra costs.

A. bid bind. B. lien bond. C.Surety bond. D. Performance Bond, E. Payment Bond,

3. A prime function of an organized commodity exchange is to furnish an established marketplace where:

A. Commodity prices can be controlled. B. Sellers of the same commodity can come together to set prices. C.there are only a limited number of buyers and sellers.

D. Products that are difficult to grade can be traded. E. Products that are difficult to grade can be traded  

4. A cash discount of 1/15. N/30 (1 percent cash discount if payment is made in 15 days, with the gross amount due in 30 days) is the equivalent of what approximate interest rate?

A. 36 percent. B. 45 percent C. 54 percent D.30 percent. E. 24 percent

5. Costs incurred in the operation of a production plant or process, but normally cannot be related directly to any given unit of production or service provided, are called:

A: indirect cost B. fixed cost C. semivariable cost D.direct cost E. variable cost

6. A payment bond protects the buyer against liens that might be granted to suppliers of material and labor to the bidder, in the event the bidder does not make proper payment to its suppliers.

True or False

7. Items for which prices are comparatively low and the cost of price reduction efforts may exceed any price saving realized are :

A. Maintenance, repair, and operating supplies. B. Raw materials C. Services. D.parts, components, and packaging E. capital assets.

8. Accepting a price discount for ordering larger quantities leads to lower levels of anticipation inventory.

True or False

9. Prices may not be directly related to costs in the market approach

True or False

10. Farmers turn to market and production contracts when they perceive the efficacy of spot markets to be inadequate in handling their risks and processors turn to contracts as a way to encourage farmers to produce specific products at desired times.

Ture or False

11. Competitive bidding, in general, is the most efficient means of obtaining a fair price for items bought.

True or False

12. Fixed costs generally remain the same regardless of the number of units produced.

Ture or false

13. In formation regarding prices trends cannot be easily obtained because most organizations are reluctant to share cost and price information

True or False

14. The process for bidding in the public sector is generally similar to the private sector, although there are a few important differences.

True or False

15. The purchasing manager indexes( PMIs) are leading economic indicators derived from monthly surveys of purchasing managers about forecasted company conditions.

True or False

Answer 1

Question 1: True

Explanation: An escalator clause is a provision that allows for a raise or increase in wages or prices under certain conditions so that people don’t need to worry about the future changes in the market while especially while entering large or long-term contracts.

Question 2: Performance bond

A performance bond is a surety bond issued by an insurance company or a bank to guarantee that the project completion is satisfactory based on the specifications and the time frame done by the contractor or supplier.

Question 3: the forces of supply and demand operate freely

(Note: Option D and E are repeated and also the correct option is not given in the question.)

Explanation: A commodity exchange is organized in which the buyers of the contracts agree to accept delivery of a commodity and the sellers of the contract agree to deliver the commodity

Question 5: Indirect cost

Explanation: Indirect costs include rent, property tax, power costs, etc., which are fixed or variable but cannot be related directly to any production unit. It is also referred to as overhead.

Question 6: True

Explanation: A payment bond is a type of surety bond that guarantees that the payment required for the project will be paid with the specified time period. It protects the party in case of failure of such payment by the bidder.  

Question 7: A. Maintenance, repair, and operating supplies

Explanation: The Maintenance, repair, operations items are products and materials purchased by a company that is mostly used to keep the business' operations running and are not directly involved in any of the manufacturing processes.