Ch. 4

Question 1

It is also known as purchasing or requisition-to-pay process.

Answer 1

Procurement Process

Question 2

3 types of procurement process

Answer 2

Direct procurement
Indirect procurement
Service procurement

Question 3

Defined as a strategic process to streamline an organization’s operations to ethically purchase quality goods and services from suppliers to realize business objectives of saving cost, reducing time, and improving profitability.

Answer 3

Procurement

Question 4

Acquisition of goods, materials, and/or services for manufacturing purposes.

Answer 4

Direct procurement

Question 5

Sourcing and purchasing materials, goods, or services for internal use.

Answer 5

Indirect Procurement

Question 6

Procuring and managing the contingent workforce and consulting services

Answer 6

Service Procurement

Question 7

Subtypes of procurement process

Answer 7

Standard
Subcontracting
Consignment
Stock transfer
External Service

Question 8

Getting finished material from the vendor.

Answer 8

Standard

Question 9

Providing raw materials to the vendor and getting finished materials.

Answer 9

Subcontracting

Question 10

Procuring material that is kept in the company’s premises and paying to the vendor for that.

Answer 10

Consignment

Question 11

Getting material from within the organization.

Answer 11

Stock transfer

Question 12

Getting services like maintenance from a third-party vendor.

Answer 12

External service

Question 13

Determine what kind of materials and services are required by a company and the proper source (vendor) of supply that fulfills our requirements.
Asking Approval of Purchase Requisition.
Materials
Services
Required delivery date
Quantity needs to be prepared

Answer 13

Purchase Requisition

Question 14

Is a document issued by the purchasing department to the vendor which describes the interest of a buyer to buy a certain quantity of a material at a certain price from a specific vendor. This is created with a reference to the purchase requisition documents.

Answer 14

Purchase Order

Question 15

Major organizational levels associated with the procurement process.

Answer 15

Client
Company Code
Plant

Question 16

Three additional organizational data that are relevant to purchasing

Answer 16

Storage location
Purchasing Organization
Purchasing Group

Question 17

These are places within a plant where materials are kept until they are needed.

Answer 17

Storage location

Question 18

Unit within an enterprise that performs strategic activities related to purchasing for one or more plants.

Answer 18

Purchasing Organization

Question 19

Three models of Purchasing Organization

Answer 19

Enterprise level (Cross Company Code)
Company level (Crossplant Model)
Plant level (Plant Specific)

Question 20

The most centralized model.
Purchasing Organization is responsible for overall enterprise.

Answer 20

Enterprise level (Cross Company Code)

Question 21

Less centralized than the enterprise-level model.
Purchasing organization is responsible for multiple plants in one company code.

Answer 21

Company level (Crossplant Model)

Question 22

most decentralized model. Each plant has its own purchasing Organization.

Answer 22

Plant level (Plant Specific)

Question 23

a hybrid model that some enterprise adopted that consists of one centralized purchasing organization that can evaluate needs and opportunities for the entire enterprise and negotiate global contracts, which purchasing organizations then use across the enterprise

Answer 23

Reference Purchasing Organization

Question 24

an individual or a group of individuals who are responsible for purchasing activities for a material or a group of materials. These activities include planning, creating purchase requisitions, requesting quotations from vendors, and creating and monitoring purchase orders.

Answer 24

Purchasing Group

Question 25

4 types of Master Data

Answer 25

Material master Vendor master Purchasing Info Records Conditions

Question 26

Key elements in material master

Answer 26

Financial data Purchasing data Plant data

Question 27

Key elements in Financial Data in material master

Answer 27

Valuation Currency Valuation Class Price Control

Question 28

is the currency that the materials will be priced in, such as U.S. dollars or euros.

Answer 28

Valuation Currency

Question 29

Identifies the general ledger accounts associated with the material. Provides an important integration point between purchasing and financial accounting because it allows the system to automatically make postings to appropriate stock or inventory accounts in the general ledger.

Answer 29

Valuation class

Question 30

identifies the method that is used to value the materials.

Answer 30

Price control

Question 31

The two options for price control are

Answer 31

moving average price and standard price.

Question 32

T/F Both options of price control define the price per total of materials in stock.

Answer 32

False

Question 33

T/F In the standard price option, the total value of the materials is divided by the quantity in stock to determine the average price per unit.

Answer 33

False, moving average price

Question 34

the total value of the materials is divided by the quantity in stock to determine the average price per unit. This price is called “moving” because it is updated each time a process step affects the price; it represents an average price of the materials in stock.

Answer 34

Moving average price

Question 35

T/F standard price is constant for a specified period of time and does not fluctuate, even when an event occurs that causes the value of the materials to change.

Answer 35

True

Question 36

T/F The standard price is updated periodically.

Answer 36

True

Question 37

is constant for a specified period of time and does not fluctuate, even when an event occurs that causes the value of the materials to change.

Answer 37

standard price

Question 38

Key elements in purchasing data in material master

Answer 38

Purchasing Group Goods receipt processing time Delivery Tolerances

Question 39

is responsible for purchasing the materials.

Answer 39

Purchasing group

Question 40

An estimate of this time is included in the material master. The ERP system utilizes this estimate in planning activities.

Answer 40

Goods receipt processing time

Question 41

In the material master, specify how much over delivery and under delivery the ordering party will accept.

Answer 41

Delivery tolerances

Question 42

includes data that are needed to properly store materials.

Answer 42

Plant Data/Storage

Question 43

include the data needed to conduct business with a vendor and to execute transactions related to the purchasing process.

Answer 43

Vendor Master Data

Question 44

Data in the vendor master are grouped into three segments:

Answer 44

general data, accounting data, and purchasing data.

Question 45

Includes Name, Addresses, Contacts or any basic information of a vendor. Set at a client level.

Answer 45

General Data

Question 46

Includes tax, bank info, reconciliation account, etc. Set at a company code level.

Answer 46

Accounting Data

Question 47

Determineprices, creating PO, verifying invoices, etc. Set at purchasing Organization level.

Answer 47

Purchasing Data

Question 48

An intersection between material master and vendor master

Answer 48

Purchasing Info Records

Question 49

Key elements of Purchasing Info Records

Answer 49

General Data Purchasing Data

Question 50

contains data specific to one vendor and one material or material group. It includes some data that are in the vendor master and the material master, as well as data that are valid for the specific combination of vendor and material.

Answer 50

Purchasing Info Records

Question 51

These data are very similar to the conditions discussed in the section on purchasing info records, and they are used to determine the appropriate prices, discounts, taxes, freight, and so on for the materials.

Answer 51

Conditions

Question 52

are not defined for a specific combination of vendor and material. Rather, they are based on the overall agreements and contracts in place with vendors. The company uses these to determine pricing when it creates purchase orders.

Answer 52

Conditions

Question 53

The info record typically defines a number of different of these, including gross price, discounts and surcharges, taxes, and freight.

Answer 53

condition types

Question 54

Key Concepts: What are the six item categories?

Answer 54

Standard Subcontracting Consignment Third-party order Stock transfer Services

Question 55

items are goods and invoices can be received.

Answer 55

Standard

Question 56

it pays the vendor only when it uses or sells the materials. For this category of materials, therefore, there is no invoice receipt step.

Answer 56

Consignment

Question 57

refers to items that the vendor ships directly to a customer.

Answer 57

Third-party order

Question 58

arrangement, a company sends materials to a vendor, who uses them to create semi-finished products. The vendor then sends these products back to the company that initiated the process.

Answer 58

Subcontracting

Question 59

such as janitorial or landscaping services — generally do not involve receiving materials. Instead, a mechanism to record services performed – a service sheet - is necessary.

Answer 59

Services

Question 60

the process whereby the system determines which general ledger accounts to use in a given situation — is automatic and is based on data contained in the material master, particularly the valuation class.

Answer 60

Account Determination

Question 61

What are the four account determination?

Answer 61

Stock materials Consumable materials Account assignment object Account assignment category

Question 62

materials that is available in stock and can be reserved by the system using a reservation

Answer 62

Stock materials

Question 63

these are materials that are acquired to be consumed by or used within the organization.

Answer 63

Consumable materials

Question 64

identifies the bearer of the cost of the purchase and is the entity for which the materials were purchased.

Answer 64

Account assignment object

Question 65

Determine the specific accounting Data needed.

Answer 65

Account Assignment Category

Question 66

What are the 5 Account assignment category?

Answer 66

Asset Cost Center Order Sales Order Project

Question 67

A company uses this category when it acquires a fixed asset, such as a car or land.

Answer 67

Asset (A)

Question 68

Companies use this category when they purchase materials for different types of orders.

Answer 68

Order (F).

Question 69

When a company purchases materials for consumption, then the purchase order must include both the cost center to be charged and the appropriate general ledger expense account number

Answer 69

Cost Center (K)

Question 70

When the purchase is associated with a specific sales order, then the sales order number and a general ledger account number must be provided.

Answer 70

Sales Order (C)

Question 71

When the purchase is related to a project, then the project number and a general ledger account number must be specified.

Answer 71

Project (P)

Question 72

determine the usability of materials— that is, how the company can use the materials in its various processes.

Answer 72

stock types or statuses

Question 73

Four common stock types are:

Answer 73

unrestricted use; in quality inspection; blocked stock, and; stock in transit.

Question 74

can be used in any manner that management feels will benefit the enterprise.

Answer 74

unrestricted use

Question 75

A company uses this status when the goods it receives from a vendor must undergo inspection before being released for consumption.

Answer 75

in quality inspection

Question 76

is typically used for materials that are damaged or unusable for some reason, such as the when the vendor delivers the wrong materials.

Answer 76

Blocked stock

Question 77

when materials are being moved from one plant to another, they are classified as ___________.

Answer 77

stock in transit.

Question 78

is associated with receiving materials from a vendor, shipping them to a customer, or otherwise “moving” them from one location within the company to another.

Answer 78

goods movement

Question 79

The four common goods movements are :

Answer 79

goods receipt goods issue stock transfer transfer posting.

Question 80

is used to change the stock type or status of or to reclassify the material into a different material type.

Answer 80

transfer posting

Question 81

records the receipt of materials into storage, which results in an increase in inventory quantity.

Answer 81

goods receipt

Question 82

when materials are removed from storage, in which case inventory is reduced. (a) ships materials to a customer, (b) uses them for internal consumption

Answer 82

goods issue

Question 83

Is used to move goods from one location to another within the organization.

Answer 83

stock transfer

Question 84

records data related to a goods movement, such as the receipt of goods from a vendor.

Answer 84

material document

Question 85

Determines which Category of movement is being executed

Answer 85

Movement types

Question 86

What are the data needed to create a purchase requisition in requirements determination?

Answer 86

item category, quantity, desired delivery date, and desired delivery location

Question 87

What is the task in requirements deternation?

Answer 87

to create the purchase requisition using the specified data.

Question 88

What is the outcome of requirements determination?

Answer 88

Purchase requisition

Question 89

company selects a vendor from a list of potential suppliers

Answer 89

SOURCE LIST

Question 90

The requisition can be satisfied through this which are longer-term agreements between an organization and a vendor.

Answer 90

OUTLINE PURCHASE AGREEMENTS

Question 91

An invitation to vendors by an organization to submit a quote for the supply of the materials or services. A quotation is legally binding on the vendor for a specified period.

Answer 91

Request for Quotation (RFQ)

Question 92

is a communication sent to a vendor in which a company commits to purchasing the specified materials under the stated terms.

Answer 92

purchase order

Question 93

Data included in order processing are

Answer 93

data from several master records, such as material master, vendor master, info records, and conditions.

Question 94

The primary task in order processing is

Answer 94

to create and send the purchase order to the vendor.

Question 95

The main document created in order processing is

Answer 95

purchase order

Question 96

which records the receipt of the materials from the vendor.

Answer 96

goods receipt

Question 97

also known as a packing list—that identifies the materials included in the delivery and the purchase order.

Answer 97

delivery document

Question 98

The essential task in the goods receipt step is

Answer 98

to verify and record the materials included in the shipment in the goods receipt document.

Question 99

The most common method of invoice verification is

Answer 99

three-way match

Question 100

It is a method between the purchase order, the goods receipt or delivery document, and the invoice.

Answer 100

Three-way match

Question 101

A method between a purchase order and the goods receipt document. This method is not very common, and it requires a high degree of trust and cooperation between partners.

Answer 101

two-way match

Question 102

display work that is to be completed. This figure shows a list of purchase requisitions that are open.

Answer 102

Work lists

Question 103

can be manipulated using the various functions of the list viewer or grid control.

Answer 103

Online lists

Question 104

is one of the components of the logistics information system.

Answer 104

Purchasing information system (IS)

Question 105

Purchasing IS provides two analysis capabilities:

Answer 105

standard and flexible analysis capabilities.

Question 106

the characteristics are organizational levels and master data relevant to the procurement process. Key figures includes quantities, such as the amount of a material ordered or delivered; value, such as the value of material ordered or delivered; and counts, such as the number of purchase orders.

Answer 106

standard analysis

Question 107

enables the user to define the content and format of the analysis. In this analysis, characteristics and key figures can be combined as needed.

Answer 107

Flexible analysis