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NEW QUESTION 51
XYZ Ltd is looking for new office space overseas. To keep the overhead expense minimal, it chooses leasing rather than purchasing new office. In leasing contract, which of the following costs are most likely to be attributable to the lessee?
1. Disposal costs
2. Rentals
3. Operating costs
4. Vendor selection costs
- A. 2, 3 and 4
- B. 1, 3 and 4
- C. 1, 2 and 4
- D. 1, 2 and 3
Answer: A
Explanation:
A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset. Property, buildings and vehicles are common assets that are leased. Industrial or business equipment is also leased. Since the lessee does not own the asset, it is not responsible for disposing the assets, and therefore, disposal costs are not attributable to the lessee. The lessee usually incurs rentals and operating costs. Finally, a company should treat the lease the same as other contracts, which they must qualify the supplier.
Reference:
LO 3, AC 3.1
NEW QUESTION 52
“A measure of the ability of an organisation to supply customers without delay” is the best defini-tion of which of the following:
- A. Re-order level
- B. Safety stock
- C. Service level
- D. Key performance indicator
Answer: C
Explanation:
In inventory management, service level is the expected probability of not hitting a stock-out during the next replenishment cycle or the probability of not losing sales.
Key performance indicators (KPIs) can be used to analyse data based on performance objectives and set actionable goals for improvement. KPIs can be developed in conjunction with suppliers as well as others, and can be used to measure the essential elements of the process.
Safety stock is the amount of inventory a business needs to have to achieve a certain level of risk mitigation when it comes to stockouts.
Reorder level (or reorder point) is the inventory level at which a company would place a new order or start a new manufacturing run.
Reference:
LO 2, AC 2.3
NEW QUESTION 53
Which of the following purchases are most likely to have low acquisition costs? Select TWO that apply.
- A. Spot purchase of a technically complexed machinery
- B. Procurement of construction projects
- C. Purchase of standard catalogued products
- D. Straight re-buy from a current supplier
- E. Purchase of ERP system
Answer: C,D
Explanation:
According to L4M7 study guide, acquisition costs in procurement are the costs associated with the activities involved in a purchase. A buying organisation incurs acquisition costs in low-value purchases as well as high-value purchases. The following purchases tend to have lower acquisition costs:
– Straight re-buy from a current supplier
– Purchase of standard catalogued products
Otherwise, any purchases of high value, high-risk items generally require greater attention of buying organisation and thus, they are likely to have higher acquisition costs. Spot purchase of a technically complexed machinery, Purchase of ERP system and Procurement of construction projects are examples of high-value, high-risk purchases.
Reference:
LO 3, AC 3.1
NEW QUESTION 54
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