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NEW QUESTION 26
Which costs in the following list are categorised as operation costs in the total cost of ownership model? Select TWO that apply.

• A. Installation and configuration costs
• B. Delivery costs
• C. Decommissioning costs
• D. Costs of any person who operates the equipment
• E. Costs of consumables

Answer: D,E

Explanation:
Costs of operating an asset can widely vary. The following table is an example from Guide to Total Cost of Ownership, New Zealand Government:

Reference:
LO 3, AC 3.1

NEW QUESTION 27
A restaurant needs to buy a new freezer. The owner applies total cost of ownership model to calcu-late the life-time cost of the freezer. This equipment has a price tag of $1,000, the supplier can offer free delivery if the restaurant pays off immediately. Estimated electricity consumption of the freezer is $200 in 5 years. The supplier ascertains that the freezer is very durable, buyer doesn't need to care about maintenance costs. However, if the restaurant needs better protection from breakdowns, the warranty is free for the first 12 months after the purchase. This warranty package can be extended once for another 24-month period with the cost of $75. After 5 years, the buyer will be able to resell this freezer for $250. What would be the estimated total cost of ownership of this freezer if the restaurant owner buys the extended warranty package?

• A. $1,200
• B. $1,025
• C. $1,525
• D. $1,275

Answer: B

Explanation:
The total cost of ownership would be the sum of all estimated costs.
The costs are as the following:
- Purchase price: $1,000
- Electricity consumption: $200
- Extended warranty: $75
Total expense = $1,000 + $200 +$75 = $1,275. Then subtract the resale price from this sum, the total cost of ownership is $1,025.
Reference:
LO 3, AC 3.1

NEW QUESTION 28
In ABC analysis, category C is also known as...?

• A. Long tail spend
• B. Direct spend
• C. Capital expense
• D. Indirect spend

Answer: A

Explanation:
Tail Spend is derived from ABC Analysis, Class A high value suppliers, Tail Spend is formed from class B & C suppliers, equates to 20% of the total spend, B is Mid Tail and C is Long tail. Effective Spend Analysis and tail spend management, ensures that procurement can focus on creating an optimum and efficient sourcing strategy.
Procurement Spend Analysis
Procurement organisations effectively identify and manage suppliers using a sourcing strategy. Tail suppliers normally have low strategic value and makes the category management, very difficult . Spend Analysis and Category Management are very closely aligned, Spend Analysis including ABC, provides the category manager, with spend visibility.
Spend Analysis and procurement metrics are used to create category plans, build supplier relation-ships, to maintain service levels and deliver the best possible price and quality for goods and ser-vices bought. The acquisition of Spend data and subsequent Spend Analysis, provides Category Managers access to a well-structured procurement process, Reference:
LO 2, AC 2.1

NEW QUESTION 29
An organisation always obtains negative cash flow regarding removal and disposal of assets. Is this statement true?

• A. No, the organisation may recover the value of the assets by reselling it
• B. Yes, some assets require enormous decommissioning costs
• C. No, disposal of assets always bring positive cash flow to the organisation
• D. Yes, the organisation incurs high maintenance cost during the disposal processes

Answer: A

Explanation:
Assets in their end of life need to be removed or disposed. Though an organisation can incur some costs in decommissioning or removal of the assets, it may recover costs by reselling the assets. Therefore, sometimes the organisation can gain positive cash flow from removal and disposal of assets. The answer should be "No, the organisation may recover the value of the assets by reselling it".
LO 3, AC 3.3

NEW QUESTION 30
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