CIPS L4M2 Defining Business Needs Online Training
CIPS L4M2 Online Training
The questions for L4M2 were last updated at Nov 23,2024.
- Exam Code: L4M2
- Exam Name: Defining Business Needs
- Certification Provider: CIPS
- Latest update: Nov 23,2024
Question #41
Company A sells a product for $100. The total unit variable costs are $60. Fixed costs as in its ac-count are $20,000.
How many products does the company have to sell to achieve break-even point?
- A . 600
- B . 550
- C . 400
- D . 500
Correct Answer: D
D
Explanation:
Break even point = Fixed costs/(Price-variable cost). In this case, break even point = 20,000/(100-60) = 500
Reference: CIPS study guide page 28-29
LO 1, AC 1.2
D
Explanation:
Break even point = Fixed costs/(Price-variable cost). In this case, break even point = 20,000/(100-60) = 500
Reference: CIPS study guide page 28-29
LO 1, AC 1.2
Question #42
A CPO is analyzing whole life cycle costing of a machinery. He realises that cost elements are not specific but come from a range of values.
Which whole-life costing model should the CPO use to get the most accurate total cost of ownership?
- A . Simulation models
- B . Optimisation models
- C . Decision support models
- D . Kraljic’s preferencing model
Correct Answer: A
A
Explanation:
There are three basic groups of WLC (whole life-cycle costing) models:
– Decision support models
– Simulation models: Life cycle cost is an essential approach to decide on alternative rehabilitation strategies for infrastructure systems. Monte Carlo simulation approach is used to develop a stochastic life cycle cost (SLCC) model and methodology in order to compare different rehabilitation scenarios/alternatives for infrastructures, such as water mains. This method assumes that some inputs are randomly variable in a range of values. – Optimisation models
Reference: CIPS study guide page 38-39
LO 1, AC 1.2
A
Explanation:
There are three basic groups of WLC (whole life-cycle costing) models:
– Decision support models
– Simulation models: Life cycle cost is an essential approach to decide on alternative rehabilitation strategies for infrastructure systems. Monte Carlo simulation approach is used to develop a stochastic life cycle cost (SLCC) model and methodology in order to compare different rehabilitation scenarios/alternatives for infrastructures, such as water mains. This method assumes that some inputs are randomly variable in a range of values. – Optimisation models
Reference: CIPS study guide page 38-39
LO 1, AC 1.2
Question #43
Which of the following bodies provides standards for the products and services in the US?
- A . ISO
- B . ANSI
- C . AFNOR
- D . BSI
Correct Answer: B
B
Explanation:
ANSI is the American National Standards Institute. It is responsible for providing technical
stand-ards in the US
LO 3, AC 3.1
B
Explanation:
ANSI is the American National Standards Institute. It is responsible for providing technical
stand-ards in the US
LO 3, AC 3.1
Question #44
When should procurement professional tolerate a risk?
- A . When the risk may disrupt the production
- B . When the risk imposes an existential threat
- C . When the risk causes some trivial annoyance
- D . When the risk breaks the relationship with the strategic supplier
Correct Answer: C
C
Explanation:
Risk control is the process by which an organization reduces the likelihood of a risk event occurring or mitigates the effects that risk should it occur. Our preferred way to determine your risk control strategy is to use the four T’s Process:
Transferring Risk can be achieved through the use of various forms of insurance, or the payment to third parties who are prepared to take the risk on behalf of the organization Tolerating Risk is where no action is taken to mitigate or reduce a risk. This may be because the cost of instituting risk reduction or mitigation activity is not cost-effective or the risks of impact are at so low that they are deemed acceptable to the business (such as some trivial annoyance). Even when these risks are tolerated they should be monitored because future changes may make it no longer tolerable.
Treating Risk is a method of controlling risk through actions that reduce the likelihood of the risk occurring or minimize its impact prior to its occurrence. Also, there are contingent measures that can be developed to reduce the impact of an event once it has occurred. Terminating Risk is the simplest and most often ignored method of dealing with risk. It is the ap-proach that should be most favored where possible and simply involves risk elimination. This can be done by altering an inherently risky process or practice to remove the risk. The same can be used when reviewing practices and processes in all areas of the business.
If an item presents a risk and can be changed or removed without it materially affecting the busi-ness, then removing the risk should be the first option considered; rather than attempting the treat, tolerate or transfer it.
Reference: CIPS study guide page 144-145
LO 3, AC 3.3
C
Explanation:
Risk control is the process by which an organization reduces the likelihood of a risk event occurring or mitigates the effects that risk should it occur. Our preferred way to determine your risk control strategy is to use the four T’s Process:
Transferring Risk can be achieved through the use of various forms of insurance, or the payment to third parties who are prepared to take the risk on behalf of the organization Tolerating Risk is where no action is taken to mitigate or reduce a risk. This may be because the cost of instituting risk reduction or mitigation activity is not cost-effective or the risks of impact are at so low that they are deemed acceptable to the business (such as some trivial annoyance). Even when these risks are tolerated they should be monitored because future changes may make it no longer tolerable.
Treating Risk is a method of controlling risk through actions that reduce the likelihood of the risk occurring or minimize its impact prior to its occurrence. Also, there are contingent measures that can be developed to reduce the impact of an event once it has occurred. Terminating Risk is the simplest and most often ignored method of dealing with risk. It is the ap-proach that should be most favored where possible and simply involves risk elimination. This can be done by altering an inherently risky process or practice to remove the risk. The same can be used when reviewing practices and processes in all areas of the business.
If an item presents a risk and can be changed or removed without it materially affecting the busi-ness, then removing the risk should be the first option considered; rather than attempting the treat, tolerate or transfer it.
Reference: CIPS study guide page 144-145
LO 3, AC 3.3
Question #45
Due to increasing demand, a local restaurant is requesting its fish vendor to supply larger quantity. The restaurant manager also asks the vendor whether it is possible to reduce the total price by 5%.
This is known as…?
- A . Straight rebuy
- B . Capital purchase
- C . Modified rebuy
- D . New purchase
Correct Answer: C
C
Explanation:
There are three major types of buying situations, which are new purchase, modified rebuy and straight rebuy. Three factors make the buying situations be different from the others, customers may face different problems in these situations.
A new purchase is a situation requiring the purchase of a product for the very first time. A straight rebuy is when a company places a second order with a supplier that is identical to the first purchase it made.
A modified rebuy is when a company orders again from a supplier, but wants to change some as-pect of the order, such as the quantity, packaging, product features, or delivery times. The scenario above is an example of modified rebuy.
Reference:
– What is a straight rebuy example?
– CIPS study guide page 3-4
C
Explanation:
There are three major types of buying situations, which are new purchase, modified rebuy and straight rebuy. Three factors make the buying situations be different from the others, customers may face different problems in these situations.
A new purchase is a situation requiring the purchase of a product for the very first time. A straight rebuy is when a company places a second order with a supplier that is identical to the first purchase it made.
A modified rebuy is when a company orders again from a supplier, but wants to change some as-pect of the order, such as the quantity, packaging, product features, or delivery times. The scenario above is an example of modified rebuy.
Reference:
– What is a straight rebuy example?
– CIPS study guide page 3-4
Question #46
Which of the following is an useful tool for value engineering?
- A . SAMOA
- B . Kraljic Portfolio Matrix
- C . Star-burst method
- D . Kano model
Correct Answer: D
D
Explanation:
Value Engineering (VE) is concerned with new products. It is applied during product development. The focus is on reducing costs, improving function or both, by way of teamwork-based product evaluation and analysis. This takes place before any capital is invested in tooling, plant or equipment.
This is very significant, because according to many reports, up to 80% of a product’s costs (throughout the rest of its life-cycle), are locked in at the design development stage. This is under-standable when you consider the design of any product determines many factors, such as tooling, plant and equipment, labour and skills, training costs, materials, shipping, installation, maintenance, as well as decommissioning and recycle costs.
The Kano model is a theory for product development and customer satisfaction developed in the 1980s by Professor Noriaki Kano, which classifies customer preferences into five categories. Both Kano model and Value Engineering aims at optimising new product, so they can be combined to-gether. CIPS L4M2 study guide consider Kano model is a tool of Value Engineering
D
Explanation:
Value Engineering (VE) is concerned with new products. It is applied during product development. The focus is on reducing costs, improving function or both, by way of teamwork-based product evaluation and analysis. This takes place before any capital is invested in tooling, plant or equipment.
This is very significant, because according to many reports, up to 80% of a product’s costs (throughout the rest of its life-cycle), are locked in at the design development stage. This is under-standable when you consider the design of any product determines many factors, such as tooling, plant and equipment, labour and skills, training costs, materials, shipping, installation, maintenance, as well as decommissioning and recycle costs.
The Kano model is a theory for product development and customer satisfaction developed in the 1980s by Professor Noriaki Kano, which classifies customer preferences into five categories. Both Kano model and Value Engineering aims at optimising new product, so they can be combined to-gether. CIPS L4M2 study guide consider Kano model is a tool of Value Engineering
Example of Kano model (source: Wikipedia)
Reference: CIPS study guide page 171-172
LO 3, AC 3.4
Question #47
A procurement organisation is keen to encourage innovation available within the supply market in the execution of an upcoming significant contract opportunity. A team member suggests that the specification should define the performance indicators so that supplier’s solution can be checked against them.
Which of the following will enable the organisation to achieve this goal?
- A . Using an outcome focused specification
- B . Establishing transparent selection criteria
- C . Using an output focused specification
- D . Applying a precise performance framework
Correct Answer: C
C
Explanation:
The buying organisation is keen to encourage innovation so they should use the outcome or output based specification. In an outcome-based specification, umbrella statements like ‘good quality’, ‘ambient temperature’, ‘convenient way’ are often used. This may confuse the suppliers, and it’s hard to check the solution that supplier offers. On the other hand, ouput-based specifications often include measurable requirements. For example, a specification for air conditioning system states that the system should maintain the room temperature at 19-24 degrees Celsius. Therefore, output specification is more appropriate in this case.
Reference: CIPS study guide page 119-124
LO 3, AC 3.1
C
Explanation:
The buying organisation is keen to encourage innovation so they should use the outcome or output based specification. In an outcome-based specification, umbrella statements like ‘good quality’, ‘ambient temperature’, ‘convenient way’ are often used. This may confuse the suppliers, and it’s hard to check the solution that supplier offers. On the other hand, ouput-based specifications often include measurable requirements. For example, a specification for air conditioning system states that the system should maintain the room temperature at 19-24 degrees Celsius. Therefore, output specification is more appropriate in this case.
Reference: CIPS study guide page 119-124
LO 3, AC 3.1
Question #48
Why should the buying organisation require the supplier to carry out acceptance testing?
- A . To get the approval from the senior management
- B . To check whether the product matches the specification
- C . To compare between the account payables and account receivables
- D . To see whether the supplier engages in unethical business practice
Correct Answer: B
B
Explanation:
Acceptance testing, in the context of the engineering and software industries, is a functional trial performed on a product or prototype before it is put on the market or delivered, to decide whether the specifications or contract have been met. It also makes sure the quality and design of the product meet both contractual and regulatory obligations in terms of functionality, usability, durability, and safety.
If a product is found to be unacceptable at this stage, it can be sent back for modification, debug-ging, repair, or re-design before it can become a costly undertaking for the producer, as would be the case in a product recall.
Reference:
– CIPS study guide page 134-135
– Acceptance Testing (investopedia.com) LO 3, AC 3.2
B
Explanation:
Acceptance testing, in the context of the engineering and software industries, is a functional trial performed on a product or prototype before it is put on the market or delivered, to decide whether the specifications or contract have been met. It also makes sure the quality and design of the product meet both contractual and regulatory obligations in terms of functionality, usability, durability, and safety.
If a product is found to be unacceptable at this stage, it can be sent back for modification, debug-ging, repair, or re-design before it can become a costly undertaking for the producer, as would be the case in a product recall.
Reference:
– CIPS study guide page 134-135
– Acceptance Testing (investopedia.com) LO 3, AC 3.2
Question #48
Why should the buying organisation require the supplier to carry out acceptance testing?
- A . To get the approval from the senior management
- B . To check whether the product matches the specification
- C . To compare between the account payables and account receivables
- D . To see whether the supplier engages in unethical business practice
Correct Answer: B
B
Explanation:
Acceptance testing, in the context of the engineering and software industries, is a functional trial performed on a product or prototype before it is put on the market or delivered, to decide whether the specifications or contract have been met. It also makes sure the quality and design of the product meet both contractual and regulatory obligations in terms of functionality, usability, durability, and safety.
If a product is found to be unacceptable at this stage, it can be sent back for modification, debug-ging, repair, or re-design before it can become a costly undertaking for the producer, as would be the case in a product recall.
Reference:
– CIPS study guide page 134-135
– Acceptance Testing (investopedia.com) LO 3, AC 3.2
B
Explanation:
Acceptance testing, in the context of the engineering and software industries, is a functional trial performed on a product or prototype before it is put on the market or delivered, to decide whether the specifications or contract have been met. It also makes sure the quality and design of the product meet both contractual and regulatory obligations in terms of functionality, usability, durability, and safety.
If a product is found to be unacceptable at this stage, it can be sent back for modification, debug-ging, repair, or re-design before it can become a costly undertaking for the producer, as would be the case in a product recall.
Reference:
– CIPS study guide page 134-135
– Acceptance Testing (investopedia.com) LO 3, AC 3.2
Question #48
Why should the buying organisation require the supplier to carry out acceptance testing?
- A . To get the approval from the senior management
- B . To check whether the product matches the specification
- C . To compare between the account payables and account receivables
- D . To see whether the supplier engages in unethical business practice
Correct Answer: B
B
Explanation:
Acceptance testing, in the context of the engineering and software industries, is a functional trial performed on a product or prototype before it is put on the market or delivered, to decide whether the specifications or contract have been met. It also makes sure the quality and design of the product meet both contractual and regulatory obligations in terms of functionality, usability, durability, and safety.
If a product is found to be unacceptable at this stage, it can be sent back for modification, debug-ging, repair, or re-design before it can become a costly undertaking for the producer, as would be the case in a product recall.
Reference:
– CIPS study guide page 134-135
– Acceptance Testing (investopedia.com) LO 3, AC 3.2
B
Explanation:
Acceptance testing, in the context of the engineering and software industries, is a functional trial performed on a product or prototype before it is put on the market or delivered, to decide whether the specifications or contract have been met. It also makes sure the quality and design of the product meet both contractual and regulatory obligations in terms of functionality, usability, durability, and safety.
If a product is found to be unacceptable at this stage, it can be sent back for modification, debug-ging, repair, or re-design before it can become a costly undertaking for the producer, as would be the case in a product recall.
Reference:
– CIPS study guide page 134-135
– Acceptance Testing (investopedia.com) LO 3, AC 3.2
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