CIPS L4M2 Exam Practice Test Instant Access

Question 1

A garment manufacturer supplies global retailers with t-shirts, shirts, and linen trousers. Because of currency fluctuations, the manufacturer is aware that they must control their direct costs in order to ensure profits. Which of the following is a direct cost for the garment manufacturer?

AFacilities rent

BCotton fabric

CUtilities cost

DOffice staff payroll

Answer : B

Cotton fabric is a direct cost because it is directly attributable to the production of the garments. Costs like rent, utilities, and payroll are indirect costs associated with running the business. Reference: CIPS Level 4, Cost Categorization in Procurement.

Question 2

John has been asked to develop a business case before obtaining approval to purchase a large piece of capital equipment for a glove manufacturing unit. Is this the right thing to do?

AYes, because this will help compare alternatives and options

BNo, because risk consideration is not John's responsibility

CYes, because this will assist the purchase order

DNo, because this can lead to business-focused thinking

Answer : A

A business case allows for the evaluation of alternatives and ensures alignment with strategic goals. It also assesses risks, benefits, and financial impact, providing a comprehensive basis for decision-making. Reference: CIPS Level 4, Capital Expenditure and Business Case Development.

Question 3

A buyer can use sources of information to review indirect costs associated with the manufacture of goods to support supplier negotiations. Is this statement true?

AYes, because indirect costs are always variable

BNo, because the only information available is for direct costs

CNo, because the supplier's quotation is the only source of information

DYes, because the buyer can understand the cost build-up of the goods

Answer : D

Analyzing both direct and indirect costs helps buyers understand cost structures and negotiate effectively. Indirect costs, like overheads, can be identified through supplier data and market benchmarks, aiding in cost transparency. Reference: CIPS Level 4, Cost Management and Negotiation.

Question 4

Which of the following are potential advantages of using a product performance specification?

It reduces the need for the buyer to produce a detailed design

It can widen the potential supply base

The buyer can specify the product's actual design in detail

Products are provided using the buyer's methodology

A1 and 2

B1 and 4

C3 and 4

D2 and 3

Answer : A

1 (Reduces design need): Performance specifications focus on outcomes rather than detailed designs, saving buyer resources.

2 (Wider supply base): Allowing suppliers to propose their own solutions can attract a broader range of suppliers.

Options 3 and 4 align with conformance specifications, not performance-based ones. Reference: CIPS Level 4, Specification Writing.

Question 5

What criteria can be applied in the production of a business case?

AQuestions, price, and evaluation

BSuggestions, feedback, and forecast

CPlans, delivery, and design

DCosts, benefits, and options

Answer : D

A strong business case includes a clear assessment of costs, the expected benefits, and the viable options available. These criteria ensure a structured approach to decision-making and alignment with strategic goals. Reference: CIPS Level 4, Business Case Development.

Question 6

Which of the following are prerequisites to run a successful bidding process? Select TWO that apply:

AThe value of the purchase must be high enough to justify the associated bidding costs of potential suppliers

BThe market contains an adequate number of suitably qualified suppliers

COnly those suppliers who have worked with the buyer in the past are allowed to bid

DBids must be submitted within twenty calendar days

EThe requirement can be met without the need for subcontracting

Answer : A, B

A (Purchase value): A competitive bidding process is only justifiable when the cost of running it is outweighed by its potential value.

B (Qualified suppliers): Ensuring a sufficient number of capable suppliers promotes competition and delivers better results.

Restricting suppliers (C) or rigid timeframes (D) can hinder the process, while subcontracting (E) is not a core consideration in most bids. Reference: CIPS Level 4, Bidding and Tendering.

Question 7

The bargaining strength of suppliers is likely to be high in which of the following situations? Select TWO that apply:

AThe buyer is educated on supply markets

BThere is a limited number of suppliers in relation to buyers

CThe buyer is large in size relative to the supplier

DThe buyer spend is a high proportion of a supplier's revenue

EThe buyer requirement is urgent

Answer : B, E

B (Limited number of suppliers): Fewer suppliers lead to higher bargaining power due to reduced competition.

E (Urgent buyer requirement): Suppliers gain leverage when buyers have limited time to source alternatives.

Education on markets and buyer size are factors that strengthen buyer, not supplier, bargaining power. Reference: CIPS Level 4, Supplier Negotiation and Market Power.

CIPS L4M2 Defining Business Needs Exam Practice Test