CIPS L3M3 Exam Practice Test Instant Access

Question 1

'Because they are set up for a specified duration, XXX contracts are subject to expiry rather than completion, unless they are renewed or extended.'

AFramework

BTerm

CSpot

DCall-off

Answer : B

Term contracts are set up for a period of time, or a 'term'.

The other answer options shown here are the subject of other QUESTION NO : s within this test.

Question 2

'When the best XXX is selected, a formal YYY ZZZ is prepared and sent to the supplier. Choose the most likely words to replace XXX, YYY and ZZZ.

ASpecification, purchase order

BSpecification, delivery address

CQuotation, purchase order

DQuotation, order acknowledgement

Answer : C

The best quotation is selected, which would meet the specification as well as meeting the other re-quired criteria; and in order to progress things round the procurement cycle, a purchase order would be issued.

Question 3

Which two of the following constitute part of a common risk assessment or risk evaluation formula?

AContingency

BLikelihood

CImpact

DPrevention

Answer : B, C

What is the likelihood of an event occurring?

What will be the impact of that event occurring?

This is the basis of almost all modern risk management.

CIPS has good content at Advanced Diploma level on the subject of Risk Management, and I have prepared tests for the two subjects in this area. :)

Sadgrove's book on business risk, in my view, is excellent; and NN Taleb's work (eg 'Antifragile') on risk, although difficult is, in my opinion, fascinating.

Question 4

Where the supplier guarantees to make good any losses suffered by the buyer as a result of product defects, for example

AInsurance

BIndebtedness

CIndemnity

DDouble indemnity

Answer : C

Indemnity.

As in 'an indemnity clause'.

'The supplier hereby indemnifies the buyer against / in the event of...'

Question 5

Which of the following is least likely to be called a 'spot' purchase?

AA single shipload of grain from Canada

BA three-year office cleaning contract

CRedecoration of the office over the weekend

DProcurement of an ergonomic office chair for a colleague who suffers from regular backache

Answer : B

The three-year contract is a term contract.

The other requirements shown are of a 'one-off' nature, and could therefore be called 'spot' purchases.

Question 6

What do we call the point when the supply firm makes neither a profit nor a loss ie where all costs are covered yet no profit is made?

ABreakeven point

BTrig point

CPoint of no return

DTipping point

Answer : B

Breakeven point. The firm breaks even: covers all of its fixed costs. At this point the firm has made neither a profit nor a loss, and hopefully is about to enter profitability.

Question 7

'The CIPS Code of Conduct states that procurement professionals should not accept any business gifts under any circumstances.' True or false?

ATrue

BFalse

Answer : B

Surprisingly, 'declared gifts of nominal value' can be accepted.

CIPS L3M3 Contract Administration Exam Practice Test