CIPS L4M2 Defining Business Needs Online Training

Question #87

Which of the following is the core of value analysis process?

A . Be creative
B . Develop
C . Evaluate
D . Gather information
E . Carry out functional analysis

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Question #87

Which of the following is the core of value analysis process?

A . Be creative
B . Develop
C . Evaluate
D . Gather information
E . Carry out functional analysis

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Question #93

Warwickshire Ambulance Service (WAS) is an NHS Trust. It operates throughout Warwickshire and the neighbouring areas. It has three core areas of activity, namely the provision of Emergency Ambulance Services, routine Patient Transport Services, and Logistic Medical Services. The agency is working towards higher service level through benchmarking.

Which of the following is the benefit of benchmarking to WAS?

A . Benchmarking is a panacea for all WAS’s problems
B . It will help WAS create performance standards derived from an analysis of the best in business
C . It helps WAS identify better ways to deliver service through a cookbook process
D . It will help WAS analyse the competitors in the industry

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Question #94

Which of the following specific markets engage in creation, liquidation and change of ownership of stock?

A . Financial
B . Manufacturing
C . Construction
D . Agriculture
E . Retail

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Question #95

XYZ Ltd is a large supermarket chain which operates mainly in the UK and Europe. Their customers are increasingly concerned about sustainability. Therefore, procurement manager is required to source the products from suppliers who have good environmental performance.

Which of the following can be an assurance that the supplier has procedures and policies to enhance its environmental performance?

A . ISO 14001:2015 certificate
B . ISO 13485:2016 certificate
C . ISO 22716:2007 certificate
D . ISO 9001:2015 certificate

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Question #96

Which of the following might be consequences of over-specification? Select TWO that apply:

A . Reducing motion waste
B . Higher cost due to inessential features
C . Limiting competition in supply market
D . Lack of essential features
E . Better contract management

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Question #97

Total cost of ownership of a solar panel is $5,000 and it is expected that the panel will make a sav-ing of $1,000 each year. So it would take 5 years for the benefits to repay the investment. Therefore, the firm plans to keep the solar panel for at least 5 years. Is payback period calculation right for making the business decision?

A . Yes, because it takes everything into account
B . No, because payback period can be only used to calculate the depreciation of a fixed asset
C . No, because payback period doesn’t take into account price fluctuations
D . Yes, because payback period shows how long the firm recovers the investment

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Question #98

Which of the following can cause overhead variance? Select TWO that apply:

A . Rising production worker’s wage rate per hour
B . Decrease in production volume
C . Spike in material price
D . Decreasing packaging costs
E . Spike in monthly leasing fee

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Correct Answer: B, E
B, E

Explanation:

Overhead variances arise when the actual overhead costs incurred differ from the expected amounts. Managers want to understand the reasons for these differences, and so should consider computing one or more of the overhead variances described below. Each of these variances applies to a different aspect of overhead expenditures. It is not necessary to calculate these variances when a manager cannot influence their outcome.

Fixed Overhead Spending Variance

The fixed overhead spending variance is the difference between the actual fixed overhead expense incurred and the budgeted fixed overhead expense. An unfavorable variance means that actual fixed overhead expenses were greater than anticipated. The formula for this variance is: Actual fixed overhead – Budgeted fixed overhead = Fixed overhead spending variance

The amount of expense related to fixed overhead should (as the name implies) be relatively fixed, and so the fixed overhead spending variance should not theoretically vary much from the budget. Fixed Overhead Volume Variance

The fixed overhead volume variance is the difference between the amount of fixed overhead actually applied to produced goods based on production volume, and the amount that was budgeted to be applied to produced goods. For example, a company budgets for the allocation of $25,000 of fixed overhead costs to produced goods at the rate of $50 per unit produced, with the expectation that 500 units will be produced. However, the actual number of units produced is 600, so a total of $30,000 of fixed overhead costs are allocated. This creates a fixed overhead volume variance of $5,000.

Variable Overhead Efficiency Variance

The variable overhead efficiency variance is the difference between the actual and budgeted hours worked, which are then applied to the standard variable overhead rate per hour. The formula is: Standard overhead rate x (Actual hours – Standard hours) = Variable overhead efficiency variance

A favorable variance means that the actual hours worked were less than the budgeted hours, resulting in the application of the standard overhead rate across fewer hours, resulting in less expense being incurred. However, a favorable variance does not necessarily mean that a company has incurred less actual overhead, it simply means that there was an improvement in the allocation base what was used to apply overhead.

Variable Overhead Spending Variance

The variable overhead spending variance is the difference between the actual and budgeted rates of spending on variable overhead. The variance is used to focus attention on those overhead costs that vary from expectations. The formula is:

Actual hours worked x (Actual overhead rate – standard overhead rate)

= Variable overhead spending variance

A favorable variance means that the actual variable overhead expenses incurred per labor hour were less than expected.

In the study guide, CIPS splits overhead variance into volume and expenditure variance. They can be understood as variable and fixed overhead variance respectively.

Reference: – CIPS study guide page 59

– What are overhead variances? ― AccountingTools LO 1, AC 1.4

Question #99

Which of the following may allow suppliers free to choose the materials, manufacturing process or delivery process?

A . Performance specification
B . Design specification
C . Technical specifications
D . Conformance specification

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Question #100

Which of the following problems may be identified as closed problems? Select TWO that apply:

A . A cyber attack takes down whole company’s IT system
B . Shortage of key medicines in healthcare industry
C . There are not enough data for procurement analytics
D . Logistics costs incur a large portion in wholesale prices
E . The suppliers don’t comply with the company’s policy on underage labour.

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