CIPS L3M3 Contract Administration Exam Practice Test

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Total 90 questions
Question 1

Which STEEPLE factor deals with issues of import taxes, rising home labour costs, regional grants, stability of governing regimes?



Answer : C

Political.

It's a close-run thing with economic, but the reference to 'stability of governing regimes' clinches if for 'political'.


Question 2

The official power to make legal decisions and judgments in a given location, for example



Answer : D

Jurisdiction.

American movies seem to spend half the time with law enforcement people arguing about who has jurisdiction.

Jurisprudence means the theory or study of law; Jurassic is about an age.

de jure means practices which are legally recognised, as opposed to de facto which is about the reali-ty (Wikipedia).


Question 3

A bottle of sparkling water sells for $1. The variable cost is 50 cents. Fixed costs for the business are $100,000 (one hundred thousand dollars). How many bottles of water must be sold for the business to reach breakeven point?



Answer : B

The 'contribution' (selling price minus variable cost) for each bottle is 50 cents. Divide the fixed costs by the contribution (100,000 / 0.5) = 200,000

If your textbook or tutor has not covered this type of calculation, don't worry; it is a difficult ques-tion and is unlikely to be a significant issue in the CIPS examination.


Question 4

When negotiating, it is highly desirable to have both a:



Answer : B

Best alternative to a negotiated agreement; and a zone of potential agreement.

The other terms shown are just fictions.


Question 5

The variable cost of a bottle of water is 25 cents. Selling price is $1, and fixed costs are one hundred thousand dollars. How many bottles of water must be sold to reach breakeven point?



Answer : B

The calculation which needs to be done is one hundred thousand (dollars) divided by the contribu-tion per bottle. The contribution per bottle is one dollar minus the variable cost - 25 cents. Thus the contribution is 75 cents. One hundred thousand divided by $0.75 = 133,333. Note the answer is in units - in response to the QUESTION NO : of how many bottles / units must be sold to break even.

For people who feel they have difficulty with calculations, just look at the possible answers. If the contribution is a bit less than a dollar, and the fixed costs are 100,000, we would expect the answer to be a number a little over 100,000 - one of the answers fits the bill, and this is the correct answer. So the QUESTION NO : may look complicated or difficult, but if you stay calm and think it through, it's not that difficult.


Question 6

Which of the following is unlikely to be regarded as a conformance specification?



Answer : B

Outputs link to the concept of a performance (or 'output') specification, not a conformance specifi-cation.


Question 7

According to Lysons and Farrington, two authors recommended by CIPS, which of the following are cost-based pricing models, as opposed to market-driven pricing models? Choose two.



Answer : C, D

Both penetration pricing and promotional pricing begin with the market price. Marginal pricing and rate of return pricing both look at the costs of doing something, and base their calculations on cost. These last two are therefore cost-based approaches to pricing.


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Total 90 questions