L4M5 Questions Pass on Your First Attempt Dumps for CIPS Level 4 Diploma in Procurement and Supply Certified
L4M5 Practice Test Pdf Exam Material
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NEW QUESTION 20
An oil refinery plant imports much of its crude oil from overseas. A procurement manager in the refinery suggests that fixing the crude oil contract price for 36 monthswould be beneficial for the company. Would this be a right thing to do?
- A. No, the refinery would not be able to reap the benefits from falling commodity price and currency rates
- B. No, fixed price should be only applied to contracts that last 60 months or longer
- C. Yes, financial budgeting task would be a lot easier with fixed pricing arrangement
- D. Yes, the supplier would bear the risk when the material price increased
Answer: A
Explanation:
Explanation
Fixed price contract is the contract in which the price is static throughout the contract period. A fixed-price contract may give certainty to budget and simplify contract management. However, it may lead to other problems since it requires bidders to estimate and bear the financial risks associated with price escalations. If the estimates are too high or events do not materialize, the buyer will pay a steep price that may affect the economy and efficiency of the contract. In the worst case, it may mean that the bid price is then above budget and may lead to a reduction in the requirements or rebidding. If the estimates are too low, it may appear as an abnormally low bid and disrupt contract execution.
On the other hand, price adjustment provisions include formulas designed to address problems, and can protect both theborrower and contractors from price fluctuations. Price adjustment formulas allow contractors to offer more realistic prices at the time of bidding. Despite concerns that they may lead to budget uncertainties, price adjustment formulas will estimate the actual cost implications that will be encountered. They use indexes that can be used for cost projection.
According to Asia Development Bank (ADB), any contract with a delivery or completion period beyond 18 months should contain an appropriate price adjustment clause.
In the scenario, the crude oil contract is planned to last 36 months. This period is pretty long with a fluctuating commodity. Therefore, the company should use price adjustment agreement.
NEW QUESTION 21
Which of the following is NOT a barrier to entry in amonopolized market?
- A. The costs of production make a single producer more efficient than a large number of producers
- B. The government gives a single firm the exclusive right to produce some good
- C. A single firm is very large
- D. A key resource is owned by a single firm
Answer: C
Explanation:
Monopolies exist in many markets in real life for very different reasons:
Ownership of a Key Resource: When one company exerts sole control over a resource that is necessary for the production of a specific product,the market may become a monopoly. For example, the only medication deemed acceptable to treat a disease comes from a particular ingredient X, and knowledge of this ingredient X is owned by a single family owned company. The company can, therefore, be saidto have a monopoly over ingredient X that is needed to cure the disease because it is the only company that can produce a product deemed acceptable.
Government Franchise: In certain instances, a monopoly may be explicitly created by the government if it grants a single company, whether private or government-owned, the right to conduct business in a particular market. For example, when a national railways transportation service is created by the government, in most cases they are granted a monopoly on the operation of passenger trains in the country. As a result, other firms are only able to offer passenger train services with the cooperation and/or permission of the government-owned provider.
Intellectual Property Protection: Extending intellectual propertyprotection to a company in the form of patents and copyrights is yet another way in which monopolies are created. When a government does this, it is in fact giving a single company an exclusive right to provide a particular product / service to the market. Patents and copyrights work in providing owners of intellectual property with the right to act as an exclusive provider of a new product for a specific length of time. This creates a temporary monopoly in the market with regards to new products and services.
Natural Monopoly: A market may also become a monopoly simply because it may be more cost-effective for one company to serve the whole market than to have several smaller firms in competition with one another. A company with virtually unlimited economies of scale is referred to as a natural monopoly. Such firms become monopolies due to their position and size, which makes it impossible for new entrants in the market to compete price-wise. Natural monopolies are common in industries with high fixed costsand low marginal costs of operation such as providers of television, telephone, and internet services.
In this question, 'A single firm is very large' is not enough to tell whether this market is monopolistic.
NEW QUESTION 22
One difference between perfect competition and monopolistic competition is that...?
- A. In perfect competition, firms produce slightly differentiated products
- B. Monopolistic competition has no barriers to entry
- C. A perfectly competitive industry has fewer firms.
- D. Firms in monopolistic competition face a downward-sloping demand curve
Answer: D
Explanation:
Explanation
Monopolistic competition exists in market where there are many competing producers but they will try to use product differentiation. Although their products may be very similar, their ability to differentiate means that they can act as monopolies in short run, irrespective of the actions of their competitors.
In perfect competition, there are no barriers to entry to the market or exit from the market. In monopolistic competition, there tend to be fewer barriers to entry or exit in these markets than in oligopolistic markets, but it doesn't mean that there are absolutely no barriers to entry in monopolistic competition.
In perfect competition, the demand curve is perfectly elastic, which means that it will be horizontal.
Otherwise, in monopolistic competition market, the demand curve will have normal downward slope.
LO 2, AC 2.2
NEW QUESTION 23
Win-lose approach is most likely to be associated with which of the following type of relationship?
- A. Strategic alliance
- B. Adversarial
- C. Partnership
- D. Outsourcing
Answer: B
Explanation:
Distributive approach to negotiation used when the interested parties are attempting to divide something up or distribute something of value, also known as zero-sum approach or win-lose. Win-lose approach is useful when the relationship with the other party (TOP) is short-term and once-off.
The question mentions 4 types of relationship:
Adversarial: Both seek to maximize position at the expense of the other. Almost no trust, communication and cooperation. These suppliers will probably provide non-core products or services with the buyer purchasing them on a one-off basis.
Outsourcing relationship: Use competent suppliers to manage non-core businesses previously done in-house.
Require high level of trust and collaboration
Partnership: Both work closely on long term development by sharing information, technology and ideas.High level of trust with the aim to benefit both parties (win-win) Strategic alliance: Both parties identify areas where they could collaborate to create mutual benefits Among these 4 types ofrelationship, only adversarial is once-off. Then it is the correct answer.
NEW QUESTION 24
Which of the following are most likely to be macro factorsthat may influence the balance of power in commercial negotiation? Select THREE that apply.
- A. Number of substitute products or services
- B. Purchasing spend volume
- C. Disruptive technologies
- D. Sustainability of natural resources
- E. Intensity of competition in a industry
- F. Economic growth rates
Answer: C,D,F
Explanation:
Explanation
All one-to-one commercial negotiations between a specific purchaser and a specific supplier take place within an industrial market and a larger business environment characterised by multiple forces which both parties typically have little control over. STEEPLE framework highlights the 6 main external influences on a business:
Table Description automatically generated
LO 1, AC 1.3
NEW QUESTION 25
In a detailed cost breakdown, a company has a salary cost of 9%, raw materials cost 51% and overheads cost
24%. Which of the following represents themark-up of that company?
- A. Approximately 116%
- B. Approximately 84%
- C. Approximately 16%
- D. Approximately 19%
Answer: D
Explanation:
Explanation
Mark-up is the amount added to the cost of an item to get to its selling price and is expressed as a percentage.
Mark-up(%) = (Price - Cost) / Cost x 100
= (100 - 9 - 51 - 24) / (9 +51 +24) x 100 = 16 / 84 x 100 = 19.04%
LO 2, AC 2.1
NEW QUESTION 26
Which of the following will shift the supply curve to the right?
- A. New disruptive technology
- B. Increasedcustomers' disposable income
- C. Decreased market price of substitute products
- D. Changes in customer taste
Answer: A
Explanation:
Explanation
The following graph shows the factors that shift the supply curve to the left and to the right.
Diagram Description automatically generated with medium confidence
NEW QUESTION 27
What letter R in the acronym SMART stands for?
- A. Random
- B. Recommended
- C. Relevant
- D. Risk-free
Answer: C
Explanation:
Explanation
SMART is an acronym that you can use toguide your goal setting. SMART is an acronym that stands for Specific, Measurable, Achievable, Relevant, and Time-bound A student met this question in the L4M5 exam. SMART is mentioned primarily in L4M3 Commercial Contracting.
LO: Unknown, AC: Unknown
NEW QUESTION 28
Which of the following is the internal factor that is taken intoprice of a product?
- A. Elasticity
- B. Exchange rate
- C. Customer tastes
- D. Risk management
Answer: D
Explanation:
Explanation
In order to answer this question, you should better consider each option:
'Exchange rate' is the value of one nation's currency versus thecurrency of another nation or economic zone.
This is a macroeconomic factor.
'Elasticity' refers to the degree to which individuals, consumers or producers change their demand or the amount supplied in response to price or income changes. This is a microeconomic factor Consumer tastes refer to the products and services that consumers consciously choose over others. Consumer tastes are so powerful that they can change how businesses conduct their activity. Like elasticity, this is also a microeconomic factor.
Among 4 options, only risk management is the internal factor. Risk pricing is a strategy applied by many companies in the world. To learn how to price the risk, you can read an article from McKinsey:
https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/how-to-price-risk-to-win-and-pr This is a question that a student met in her actual exam. The knowledge section is unknown.
LO: Unknown, AC: Unknown
NEW QUESTION 29
When prices of input materials increase, supply curve shifts to the left while demand remains stable. The shift of supply will tend to cause which of the following?
- A. An increase in the equilibrium price and quantity
- B. A decrease in the equilibrium price and quantity
- C. An increase in the equilibrium price and a decrease inthe equilibrium quantity
- D. A decrease in the equilibrium price and an increase in the equilibrium quantity
Answer: C
Explanation:
The case in the question is illustrated as below:
Diagram Description automatically generated
The equilibrium price initially at P0 with quantity Q0, when supply curve shifts to the left, it will converge with demand curve at new equilibrium pointwith price P1 and quantity Q1. As you can see from the graph, P1 is greater than P0 and Q1 is smaller than Q0.
NEW QUESTION 30
A senior buyer analyses the supply market and he realises that his organisation is treated asExploit according to supplier's perspective model. What does he need to do?
- A. Increase the spend value
- B. Adopt opaque processes
- C. Pay the suppliers on time
- D. Raise the transactional costs to do business
Answer: C
Explanation:
Explanation
The supplier's perspective model has two axes: Spend value and Attractiveness:
Chart, table Description automatically generated
Exploit is the quadrant where the buyer has high spend but low attractiveness. Overarching supplier objective would be: "Milk this customer and charge a high price to compensate for all the painthey put us through".
The buyer should increase its attractiveness to raise the position to Core customer. To do this, a buyer may:
- Simplify procurement processes
- Simplify contracting processes
- Use clear and concise documentation
- Eliminateonerous supplier terms and conditions
- Make the payment on time
- Use transparent processes
- Promote ethical behaviours
LO 1, AC 1.4
NEW QUESTION 31
Which of the following are most likely to be fixed costs of an airline? Select TWO that apply.
- A. Catering services
- B. Flightcrew training
- C. Fuel
- D. Purchase of aircraft
- E. Advertising and promotion
Answer: B,D
Explanation:
Explanation
Fixed costs (FC) are costs that do not vary with volume. To an airline once aircraft are purchased, flight crews trained and departures scheduled, costs are disproportionately fixed.
Variable costs (VC) arethose which vary with the amount produced. Fuel, catering services and marketing are examples of variable.
LO 2, AC 2.1
NEW QUESTION 32
Which of the following is a disadvantage of absorption costing method?
- A. Using marginal cost of producing addition units
- B. Variable costs are not taken into product final costs
- C. Fixedcost allocated to products on the basis of the cost of activities used in producing them
- D. Limited understanding of true costs incurred
Answer: D
Explanation:
Absorption costing is an approach to allocating overheads in which indirect costs are loaded or absorbed into direct costs related to specific jobs, processes or outputs, using an estimated basis of allocation.
Graphical user interface, text, chat or text message, website Description automatically generated
NEW QUESTION 33
Cost and price analysis is very important for buyers when they are preparing for a negotiation with supplier.
Which of the following is a benefit of knowing supplier's fixed costs?
- A. The buyer would be able to know the point at which the supplier would reject the offer
- B. The buyer would be able to know the right volume to reach break-even point
- C. With the sole understanding of supplier's fixed cost, the buyer would be able to know the volume at which supplier maximises their profit in short-run
- D. The buyer would be able to get a comprehensive picture of supplier's efficiency
Answer: B
Explanation:
Explanation
Knowing supplier's fixed and variable costs is beneficial for the buyer in a negotiation. With these insights, the buyer would know the volume atwhich the supplier reaches break-even points and then offers significant discount due to economies of scale.
NEW QUESTION 34
Which of the following should be adopted to minimise the conflict between parties in commercial negotiation?
- A. Ground rules
- B. The rule of law
- C. Ground beam
- D. Ground zero
Answer: A
Explanation:
Ground rules are the basic rules for doing something (Cambridge Dictionary). A negotiation goes more smoothly if ground rules are adopted. Then if something goes awry at a later time, you can point out the ground rule that has been violated.Procurement professional should seek to minimise conflict over process through agreeing 'ground rules' and approach as far as possible with the other party in advance of any negotiation meetings.
There should be two sets of ground rules: 1) groundrules for the negotiations between the two parties and 2) ground rules for the negotiating team itself. This article is about the negotiating team ground rules.
The rule of law is the condition in which all members of society, including its political leaders, accept the authority of the law.
Ground zero describes the point on the Earth's surface closest to a nuclear detonation. In the case of an explosion above the ground, ground zero refers to the point on the ground directly below the nuclear detonation.
The Ground Beam is the beam which is provided usually at the foundation level to support building walls, joists, etc.
NEW QUESTION 35
Which of the following are most likely to harm trust between buyer and supplier in a commercial relationship?
Select TWO that apply.
- A. Reduced response time during contract performance
- B. Resolving some conditions that would otherwise have them competing for resources
- C. Exploring a disagreement to learn from each other's insights
- D. Avoidance of submitting important documentations
- E. Subjective assessment of performance
Answer: D,E
Explanation:
Explanation
Trust-destroying behaviours:
- Rumours of partnership or relationship breaking down
- Emotion-based assessment of performance
- Avoiding accountability, passing the blame to others
- General mood - resentment, distrust,frustration, etc
LO 1, AC 1.4
NEW QUESTION 36
A supplier's mark-up on all products is 25%. Supplier's profit margin is...?
- A. 15%
- B. 30%
- C. 20%
- D. 75%
Answer: C
Explanation:
Explanation
Table Description automatically generated with medium confidence
Text Description automatically generated with low confidence
LO 2, AC 2.1
NEW QUESTION 37
Which of the following should be done by the procurement team at the closing stage of a negotiation? Select TWO that apply.
- A. Leave the meeting as soon as possible
- B. Seek agreement in principle if TOP does not have the final authority
- C. Tell TOP that they could have got a better deal
- D. Accept ambiguity or uncertainty
- E. Gloat publicly about the deal
Answer: A,B
Explanation:
Explanation
The agreement and closingphase is the phase when it is either clear through explicit language, or strongly suggested through non-verbal signals, that TOP is ready to move to agreement. Judging when to close can be difficult and as with phases of the negotiation, experience, observation, practice and reflection will be the best ways to learn here.
In the closing phase, procurement should:
- Watch for closing/buying signals
- Check to ensure all issues have been resolved
- Consider using visual aids to summarise
- Use 'summary close'
- Make a decision to conclude/close
- Seek agreement in principle if TOP does not have the final authority
- Make your own private notes on the final agreement
- Shake hands on the agreement
- Leave the meeting as soon as possible thereafter.
LO 3, AC 3.1
NEW QUESTION 38
Whenimplementing value analysis or value engineering, which of the following acronyms reminds both buyer and supplier of ideas on removal, substitution and design-out of cost elements?
- A. STOPS WASTE
- B. OWN-IT
- C. SMART
- D. SAMOA
Answer: A
Explanation:
Ray Carter coined the mnemonic STOPS WASTE to remind buyers of 10 cost-reduction ideas they can ask for themselves and their suppliers in any situation when considering a key purchase input. Stop Waste by:
Standardisation - is there a standard specification?
Transportation - is the inbound transport classification appropriate
Over-engineered - is the specification too tight?
Packaging - can packaging be reduced or eliminated?
Substitutes - is there a cheaper substitute material
Weight - is there opportunity to reduce weight of the product?
Any unnecessary processing - is there any unnecessary design or feature?
Supplier's input - are suppliers able to assist with the cost reduction To make - is it more economical to make or buy?
Eliminate - if no one uses the feature, can it be eliminated?
SAMOA is a useful acronym for checking and testing the information gathered from the Internet:
Source
Audience
Methodology
Objectivity
Accuracy
OWN-IT is acronym for 5 steps in the process of collecting and analysing the data andinformation needed in any field:
Outline
Wide search
Narrow search
Increase your stockpile of information
Transform your stockpile into new knowledge
A SMART goal is used to help guide goal setting. SMART is an acronym that stands for Specific,Measurable, Achievable, Realistic, and Time-bound.
NEW QUESTION 39
An organisation is developing the specification for a capital purchase project. An important stakeholder has doubt on the draft specification. The buyer invites him to the product function meetings. In these meeting the attendees can raise their concerns, the specification development team takes in all the concerns and adjusts the specification accordingly. What kind of technique is the specification development team using?
- A. Persuasive reasoning
- B. Visionary
- C. Directive
- D. Coalition
Answer: D
Explanation:
In the scenario, anyone who has concerns can join a meeting to raise their thoughts. The project team takes the stakeholders' ideas into account. This isknown as coalition: A group of people or organisations come together and work collaboratively to achieve some goals. Specifically in this scenario, the goal is creating a high-quality and unified specification for an important project.
NEW QUESTION 40
Which of the following is the most appropriate approach to investors or shareholders who have high level of influence but low interest in the running of business?
- A. Keep these people inform through general communication media
- B. Engage and consult with them regularly
- C. Manage them closely
- D. Engage and keep them satisfied
Answer: D
Explanation:
Explanation
Investors or shareholders who have high level of influence but low interest belong to 'Keep satisfied' quadrant of Mendelow's Stakeholder Matrix.
You may read 2 versions from L4M1 and L4M5 here:
Table Description automatically generated
LO 1, AC 1.1
NEW QUESTION 41
XYZ Ltd decides to go to market for a cleaning contract to service a number of offices. It knows that it will get a price which may, ormay not, be better than the one it is currently paying. To gain leverage in the marketplace, the organisation decides to add other related services to the scope, such as gardening, security and maintenance, which increase the value of the contract. This is an example of which forms of spend consolidation?
- A. Volume pooling
- B. Volume consolidation across categories
- C. Volume redistribution
- D. Purchasing consortia
Answer: B
Explanation:
Explanation
Buying organisation may increase its leverage with suppliers byconcentrating spend. Supplier spend consolidation can take many forms as outlined below:
- Vendor base reduction: straightforward reduction of number of suppliers in any category
- Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
- Volume redistribution: making recommendations following spend analysis to move from one supplier to another
- Volume consolidation across categories: certain purchase requirements may be common across a number of categories. In the scenario, XYZ has combined different categories but closely related to office services into a larger contract so that they can increase their leverage.
- Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
- Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.
LO 1, AC 1.3
NEW QUESTION 42
Which of the following are common forms of collaborating approach in Thomas-Kilmann conflict resolution model? Select THREE that apply.
- A. Resolving some conditions that would otherwise have them competing for resources
- B. Seeking a quick middle-ground position
- C. Exploring a disagreement to learn from each other's insights
- D. Trying to find a creative solution to current problem
- E. Trying to win at any cost
- F. Yielding to another's point of view
Answer: A,C,D
Explanation:
Collaborating is both assertive and cooperative. When collaborating, an individual attempts to work with the other person to find a solution that fully satisfies the concerns of both. It involves digging into an issue to identify theunderlying concerns of the two individuals and to find an alternative that meets both sets of concerns. Collaborating between two persons might take the form of exploring a disagreement to learn from each other's insights, resolving some condition that would otherwise have them competing for resources, or confronting and trying to find a creative solution to an interpersonal problem.
NEW QUESTION 43
Which of the following method should be used in negotiation if both parties want to communicate verbally and non-verbally without having to meet face-to-face?
- A. Teleconferencing
- B. Web conferencing
- C. Telephone
- D. In-person meeting
Answer: B
Explanation:
Explanation
Using webcams in a web conference means you are able to communicate both verbally and non verbally.
Over the phone, you cannot see TOP, the only cue/signal you have regarding their mood, interest and attitude is person's voice, intonation andany delay.
A teleconference is a telephone meeting among two or more participants involving technology more sophisticated than a simple two-way phone connection.
In-person meeting requires you team and TOP to be in the same place at the same time.
LO 2, AC 2.4
NEW QUESTION 44
Which of the following are factors that might shift the demand curve for a consumer good to the right?
1. Prices of complementary goods decrease
2. Price of the consumer good decreases
3. Customers' expectation of higher prices in the future
4. Consumer tastes shift toward substitute products
- A. 1 and 3 only
- B. 4 and 2 only
- C. 1 and 2 only
- D. 3 and 4 only
Answer: A
Explanation:
Explanation
A shift in demand occurs when an influencing factor other than price changes. Those factors are:
- The income ofbuyers
- The tastes and preferences of buyers
- The prices of other goods and services, especially substitutes and complements
- Expectations of buyer about the future
In this question:
- 'Prices of complementary goods decrease' will lead toquantity demanded for that complements rising, then demand for consumer good will increase accordingly.
- 'Price of the consumer good decreases' will increase the quantity demanded for that good, but it will not shift the demand curve
- 'Customers' expectation of higher prices in the future': in this scenario, customers tend to buy more to store in present, which leads to demand curve shifting to the right
- 'Consumer tastes shift toward substitute products': Demand for substitutes will rise, so demand forthat consumer good will decrease and the demand curve shifts to the left.
LO 2, AC 2.2
NEW QUESTION 45
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L4M5 [Dec-2021] Newly Released] Exam Questions For You To Pass: https://pass4sure.dumps4pdf.com/L4M5-valid-braindumps.html