[Jan 04, 2022] Exam4PDF L4M5 Exam Practice Test Questions (Updated 165 Questions)
Pass CIPS L4M5 Exam Info and Free Practice Test
CIPS L4M5 Exam Syllabus Topics:
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NEW QUESTION 80
Which of the following are examples of connected stakeholders in a private organisation? Select TWO that apply.
- A. Shareholders
- B. Media
- C. Government
- D. Customers
- E. Local community
Answer: A,D
Explanation:
Connected stakeholders are those who, by contractual or commercial relationships, have a significant stake in organisation activity. As a general rule, connectedstakeholder (with the exception of suppliers) have a low level of influence on procurement negotiations.
Examples of connected stakeholders are: suppliers, customers, bank where the organisation opens its account, shareholders.
NEW QUESTION 81
Which type of question should be used to receive affirmation on statement?
- A. Leading
- B. Closed
- C. Narrow
- D. Open
Answer: B
Explanation:
Different questioning styles can be used to elicit desired responses:
Text Description automatically generated
NEW QUESTION 82
Before engaging in a negotiation with a supplier of rechargeable lights, procurement team tries to visualise the breakdown of supplier's costs to calculate its break-even point. They estimate that total fixed expenses related to rechargeableelectric light are $270,000 per month and variable expenses involved in manufacturing this product are $126 per unit. The supplier charges its customer $180 per unit. Within its current capacity, this supplier will make a profit at which of the following?
- A. More than 1,500 units are sold monthly
- B. More than 5,000 units are sold monthly
- C. Exactly 1,500 units are sold monthly
- D. Exactly 5,000 units are sold per month
Answer: B
Explanation:
Explanation
The analysis of cost into fixed and variable enables organisationsto determine their break-even point (BE) - the point where total revenue from sales and total cost exactly balance. All costs need to be covered by sale revenue in order for a company to make a profit. If you know your fixed costs and your variable coststhen you can work out the minimum quantity of goods or services you need to sell to break even. Break even point is measured in volume and can be worked out graphically or via formulae:
Price - Variable costs = Contribution
Break even point (volume) = Fixed expenses/Contribution margin per unit In this scenario, the break even point (Q) is: 270,000/(180-126) = 5,000 To make a profit, the supplier needs to sell more than 5,000units per month.
The BE point is thus an important determinant of flexibility of pricing for suppliers. Before BE is achieved there will be much greater reluctance to offer price concessions to customers than after BE is achieved.
LO 2, AC 2.1
NEW QUESTION 83
Which of the following statements about oligopoly isincorrect?
- A. Oligopolistic firms recognize their interdependence
- B. A few firms play an important role in the sale of a product
- C. Prices in oligopoly are predicted to fluctuate widely and frequently
- D. One firm's behaviour is a function of what its rivals do
Answer: C
Explanation:
Explanation
An oligopoly exists when there are small number of producers that exert a significant influence in the market.
Oligopoly's main characteristics are discussed as follows:
- Interdependence
The most important feature of oligopolyis the interdependence in decision-making of the few firms which comprise the industry. This is because when the number of competitors is few, any change in price, output, product etc. by a firm will have a direct effect on the fortune of its rivals, which will then retaliate in changing their own prices, output or products as the case may be.
- Importance of advertising and selling costs
A direct effect of interdependence of oligopolists is that the various firms have to employ variousaggressive and defensive marketing weapons to gain a greater share in the market or to prevent a fall in their market share. For this various firms have to incur a good deal of costs on advertising and on other measures of sales promotion. Therefore, thereis a great importance of advertising and selling costs under conditions of market situation characterised by oligopoly
- Group behaviour
Another important feature of oligopoly is that for the proper solution to the problem of determination of price and output under, it analysis of group behaviour is impor-tant.
- Indeterminateness of demand curve facing an oligopolist
In this question, 'Prices in oligopoly are predicted to fluctuate widely and frequently' is an incorrect statement as producers in oligopoly often try to set up price. Prices fluctuate more frequently in perfect competition.
LO 2, AC 2.2
NEW QUESTION 84
Which of the following is most likely a consequence of falling interest rate?
- A. Decrease investment
- B. Increase aggregate demand
- C. Decreaseconsumption
- D. Increase savings
Answer: B
Explanation:
If interest rate are too low and credit is too, cheap rates can fund a spending boom with consumers and businesses buying (investment) more than they can afford to pay back.
NEW QUESTION 85
Which of the following are recognised techniques in contract negotiation? Select THREE that apply.
- A. Pacing and leading
- B. Anchoring
- C. Validation
- D. Role ethics
- E. Framing and reframing
- F. Ratification
Answer: A,B,E
Explanation:
Explanation
The question asks about negotiation techniques which are not present in the book. In this question, there are only 3 recognised techniques:
- Framing and reframing: A frame is an assumption, or set of assumptions, that guides our attention and behavior. Reframing is the ability to identify and significantly change assumptions or perspectives. Framing has a significant impact on the effectiveness of negotiation outcomes and negotiator working relationships.
You can read more on framing and reframing here.
- Anchoring: Anchoring bias is well-known cognitive bias in negotiation and in other contexts. The anchoring bias describes the common tendency to give too much weight to the first number put forth in a discussion and then inadequately adjust from that starting point, or the "anchor." We even fixate on anchors when we know they are irrelevant to the discussion at hand. You can read more on anchoring here.
- Pacing and leading: Pacing and leading is a two-step lever of persuasion. First - You "match your pace" to the person you want to influence in as many ways as possible. You can do this by mimicking the way the person talks, stands, their appearance, etc. You can also mimic less tangible aspects like the way they act, or their emotional state.Second - Once you've set your pace with someone, lead them to whatever decision or behavior you want them to take! You can read more on pacing and leading here.
NEW QUESTION 86
Which of the following is the internal factor that is taken intoprice of a product?
- A. Elasticity
- B. Exchange rate
- C. Customer tastes
- D. Risk management
Answer: D
Explanation:
Explanation
In order to answer this question, you should better consider each option:
'Exchange rate' is the value of one nation's currency versus thecurrency of another nation or economic zone.
This is a macroeconomic factor.
'Elasticity' refers to the degree to which individuals, consumers or producers change their demand or the amount supplied in response to price or income changes. This is a microeconomic factor Consumer tastes refer to the products and services that consumers consciously choose over others. Consumer tastes are so powerful that they can change how businesses conduct their activity. Like elasticity, this is also a microeconomic factor.
Among 4 options, only risk management is the internal factor. Risk pricing is a strategy applied by many companies in the world. To learn how to price the risk, you can read an article from McKinsey:
https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/how-to-price-risk-to-win-and-pr This is a question that a student met in her actual exam. The knowledge section is unknown.
LO: Unknown, AC: Unknown
NEW QUESTION 87
In airline industry, suppliers prefer to adopt dynamic pricing in order to constantly monitor and change their fares inresponse to market conditions. Dynamics pricing is based on which costing method?
- A. Activity-based costing
- B. Cost plus costing
- C. Absorption costing
- D. Marginal costing
Answer: D
Explanation:
Dynamic pricing is the practice of dynamically calculating the price of a product or service in order to incorporate real-time market conditions, input costs, and/or competitive perspectives. Dynamic pricing which is based on marginal costing, is used by airlines and many other organisations.
Marginal cost is the cost of producing an additional unit of output. Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
NEW QUESTION 88
In which of the following costing methods, overhead costs are applied in proportion to production volume?
- A. Mark-up costing
- B. Activity-based costing
- C. Absorption costing
- D. Marginal costing
Answer: C
Explanation:
There are 3 major costing methods:
Marginal costing
* Uses marginal cost of producing addition units
* Uses variable cost to derived a unit cost (does not include fixed cost)
* Fixed cost treated as a 'period cost' and deducted, as a total amount, from total contribution to profit for the period, in the firm's profit and loss account Absorption costing
* Calculates total cost of producing product
* In addition to variable cost, a fair proportion of fixed cost is allocated to (absorbed) eachunit of output, as a fixed cost per unit Activity based costing
* Similar to absorption costing but with fixed cost allocated to products on the basis of the cost of activities used in producing them LO 2, AC 2.1
NEW QUESTION 89
Professional buyer is planning for the next negotiation of a simple one-off contract. This negotiation is typified by which of the following? Select TWO that apply.
- A. Continuous dialogue with supplier
- B. Pricing is the most important criterion
- C. Vendor ratings will be used
- D. Total cost of ownership is themost important criterion
- E. Arm's-length approach
Answer: B,E
Explanation:
Professional buyers, when planning or engaging in negotiation with suppliers, should always be aware ofwhere the intended and actual relationship with this supplier is positioned on the 'spectrum' or 'continuum' of commercial relationships. The relationship spectrum describes the range of commercial relationships between a buyer and supplier based on richness of communication, longevity and mutual dependence.
Timeline Description automatically generated
In the question, the contract is simple one-off (or spot buy), which means the relationship will likely to be more transactional. In such relationship, price is the most important criteria and buyer may adopt arm's-length approach.
NEW QUESTION 90
At the first stage of CIPSProcurement and Supply Cycle (Understand need), which of the following is the most important duty of procurement professional?
- A. Undertaking 'reverse marketing'
- B. Demand management
- C. Evaluating the interests from suppliers
- D. Deciding whether RFQ or ITT should be used
Answer: B
Explanation:
At the first stage of CIPS Procurement and Supply Cycle (Understand need and develop a high-level specification), procurement professional mainly negotiate with internal stakeholders. They have a duty toproportionately and constructively challenge specification if there's genuine doubt over the need or how the need is expressed. This is called demand management. Their first duty is to the organisation's treasury, not to functional managers.
Demandmanagement including: negotiation/challenge between procurement and internal stakeholders over the need/requirement/specification. Remember that in any process or product, the greatest opportunity for cost reduction is at the design stage.
NEW QUESTION 91
A buying organisation with a low spend and the reputation for paying late might be viewed by a supplier as which of the following?
- A. Core
- B. Nuisance
- C. Develop
- D. Exploit
Answer: B
Explanation:
To answer this question, you should know The seller's perspective as in 'How to Negotiate Professionally':
Chart, treemap chart Description automatically generated
In the scenario, the buyer's spend is low, while they seem unattractive to seller (as they tend to pay late). So the buyer is classified as Nuisance in seller's perspective.
NEW QUESTION 92
Which of the following is the area where two or more negotiating parties may find common ground?
- A. Walk away area
- B. Zone of potential agreement
- C. Zone of proximal development
- D. Best alternative to a negotiated agreement
Answer: B
Explanation:
Explanation
The zone of possible agreement (ZOPA) orbargaining range is considered an area where two or more negotiating parties may find common ground. It is this area where parties will often compromise and strike a deal. In order for negotiating parties to find a settlement or reach an agreement, they must work towards a common goal and seek an area that incorporates at least some of each party's ideas.
The zone of proximal development refers to the difference between what a learner can do without help and what he or she can achieve with guidance and encouragement from a skilled partner.
There is no Walk away area. Walk away point is a position from which you cannot concede any more ground and must walk away/decline a deal.
Best alternative to a negotiated agreement is a fallback or backstop position if the negotiation fails to result in an agreement/no deal is agreed.
LO 1, AC 1.2
NEW QUESTION 93
Which of the following is considered a weakness of a 'dealer' style negotiator?
- A. Very precise
- B. May be too assertive
- C. May shift position quickly
- D. Focuses on the facts and not the people
Answer: C
Explanation:
Explanation
A useful and simple shorthand for preferred negotiation styles is summarised by four simple descriptor:
'warm', 'tough', 'logical' and 'dealer', which can beapplied to describe individuals' dominant preferred style in most circumstances.
Warm - a people person
Tough - a hard-nosed negotiator
Logic - a numbers person
Dealer - a trader who loves bargaining
Strengths, weaknesses of dealer style are described below:
Table Description automatically generated
LO 2, AC 2.4
NEW QUESTION 94
Which of thefollowing are signs indicating that TOP is using coercive power in commercial negotiation?
Select TWO that apply.
- A. Use of guilt
- B. Positive references
- C. Withdrawal of benefits
- D. Technical expertise
- E. Demonstrating fairness and respect
Answer: A,C
Explanation:
Coercive power comes from the belief that a person can punish other for non-compliance, and can be considered as the flip side of reward power. Coercive power rests in the individual's ability to change other people's behaviour through threat,intimidation, use of guilt, ability to embarrass or shame, or withdrawal of benefits,...
NEW QUESTION 95
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