[Feb-2025] Latest CIPS L4M2 exam dumps and online Test Engine
CIPS L4M2: Selling CIPS Level 4 Diploma in Procurement and Supply Products and Solutions
NEW QUESTION # 77
Why should the buying organisation require the supplier to carry out acceptance testing?
- A. To see whether the supplier engages in unethical business practice
- B. To get the approval from the senior management
- C. To check whether the product matches the specification
- D. To compare between the account payables and account receivables
Answer: C
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
NEW QUESTION # 78
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. Optimisation models
- B. Simulation models
- C. Decision support models
- D. Kraljic's preferencing model
Answer: B
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:
LO 1, AC 1.2
NEW QUESTION # 79
Which of the following technology is likely to be an innovation in financial sector?
- A. Robotics
- B. E-auction
- C. Blockchain
- D. E-commerce
Answer: C
Explanation:
Traditional financial systems operate with a centralised database, usually with a single point of authority.
Blockchain technology, on the other hand, allows for a distributed database that holds a growing number of records. Instead of existing in one place, the ledger is continually updated and synchronised across multiple computers in a network. Therefore, any participant in the network with the proper authorisation can view the entire ledger - without relying on an intermediary or any one authority.
Another key feature of blockchain technology is a "smart contract," which is a self-executing protocol that enforces a previously agreed arrangement. For example, a smart contract could trigger an automatic refund under certain conditions or the automatic payment of an agreed commission after a sale. These smart contracts can eliminate delays in traditional Finance processes, while increasing transparency and reducing reliance on middlemen to follow through on their commitments. Moreover, like other parts of a blockchain, smart contracts are immutable, so they can enhance accuracy in the financial statements.
LO 2, AC 2.1
NEW QUESTION # 80
A company is evaluating two investment projects: Project A and Project B. Project A has a high initial cost but generates substantial cash flows over time. Project B has a lower initial cost but generates modest cash flows consistently. The company's cost model indicates a payback period of three years for Project A and a payback of four years for Project B. Which of the following statements is correct regarding the cost models and cash flow profiling for these projects?
- A. Project A has a shorter payback period, making it a quicker return on investment compared to Project B
- B. Project A's higher initial cost is a disadvantage, and its payback period should be extended for better profitability
- C. Project B's modest and consistent cash flows make it a risky investment option due to a longer payback period
- D. Project B's lower initial cost allows for faster profit realisation, making it the better investment choice
Answer: A
Explanation:
Detailed Explanation:Project A's shorter payback period means the initial investment is recovered more quickly, which is often preferred in cost models. The higher initial cost is offset by substantial cash flows, making it the more viable option based on ROI. Reference: CIPS Level 4, Investment Appraisal Techniques.
NEW QUESTION # 81
An automotive manufacturer is sourcing rubber components from Company A. The specification given to the supplier state that the component should be 1 meter long, without mentioning the tolerance. Enthusiast with the opportunity, engineers at Company A work hard to cut the components with tolerance at only +/- 1mm.
The head and tail of the component is then joined together to form a circular band. After that it is stretched over another component. To fit this purpose, the rubber component can be at any length from 80cm to 110cm.
This is an example of...?
- A. Waiting
- B. Defects
- C. Over processing
- D. Unnecessary motion
Answer: C
Explanation:
This questions is intended to ask students about types of waste in Lean principles.
Lean was born out of manufacturing practices but in recent time has transformed the world of knowledge work and management. It encourages the practice of continuous improvement and is based on the fundamental idea of respect for people. Womack and Jones defined the five principles of Lean manufacturing in their book "The Machine That Changed the World". The five principles are considered a recipe for improving workplace efficiency and include: 1) defining value, 2) mapping the value stream, 3) creating flow,
4) using a pull system, and 5) pursuing perfection.
Lean principles aim to eliminate waste in processes. The eight wastes of Lean principles are:
- Defects
- Over-production
- Waiting
- Not using talent
- Transport and handling
- Inventory
- Motion waste
- Excess processing
In the scenario, the component is processed more than necessary. The engineers try to make them as accurate as possible with very little tolerance. In fact, the component does not need to be that precise. This excesses buyer's requirements and incurs costs for both buyer and supplier. The scenario is an example of over processing (or excess processing).
Overprocessing is one of the seven wastes of lean manufacturing (or 7 mudas); Overprocessing is adding more value to a product than the customer actually requires such as painting areas that will never be seen or be exposed to corrosion.
Overprocessing as one of the seven wastes is caused by having unclear standards and specifications, many operators will try to do the best job possible and will not always be aware of what truly adds value to the product or even the end use. They will therefore often expend time polishing and finishing components that do not require it.
NEW QUESTION # 82
Which kind of these following costs belong to fixed costs? Select TWO that apply.
- A. The packaging and distribution costs
- B. The depreciation of capital inputs
- C. The annual income tax charged by local authorities
- D. The costs of leasing or purchasing capital equipment
- E. Energy consumption in manufacturing
Answer: B,D
Explanation:
Based on variability, the costs has been classified into three categories, they are fixed, variable and semi variable. Fixed costs, as its name suggests, is fixed in total i.e. irrespective of the number of output produced.
Variable costs vary with the number of output produced. Semi-variable is the type of costs, which have the characteristics of both fixed costs and variable costs (Source: Key Differences).
Among above costs, leasing and depreciation are relatively static and do not change if volume of business activities increase or reduce.
Packaging, utilities and annual business rate (tax) are variable costs.
NEW QUESTION # 83
A consulting firm in London had previously had static budgets. They were set once and locked in for the year.
This resulted in departments meeting their budgets early and doing virtually nothing the rest of the accounting period. To address this imbalance, the company tossed out the static budget and developed a new one for each department of the next 18 months. And each month, real sales figures are analyzed against the plan and the budget is adjusted accordingly. Then the company adds another month into the budgeting plan. What type of budget this company is using?
- A. Zero-based budget
- B. Rolling budget
- C. Activity-based budget
- D. Incremental budget
Answer: B
Explanation:
A rolling budget is continually updated to add a new budget period as the most recent budget period is completed. Thus, the rolling budget involves the incremental extension of the existing budget model. By doing so, a business always has a budget that extends one year into the future.
Think of continuous (rolling) budgets as waves rolling ashore on the beach. A new wave comes in each time, replacing the one that was there before. From a financial perspective, the wave is your budget, and the time between waves is longer! These reporting time frames can be monthly, quar-terly, yearly, etc.
An incremental budget is a budget prepared using a previous period's budget or actual performance as a basis with incremental amounts added for the new budget period.
Zero-based budgeting (ZBB) is a method of budgeting in which all expenses must be justified for each new period. The process of zero-based budgeting starts from a "zero base," and every function within an organization is analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period, regardless of whether each budget is higher or lower than the previous one.
Activity-based budgeting (ABB) is a system that records, researches, and analyzes activities that lead to costs for a company. Every activity in an organization that incurs a cost is scrutinized for potential ways to create efficiencies. Budgets are then developed based on these results.
NEW QUESTION # 84
To improve the productivity, Plantation Ltd is planning to purchase a tractor, which it has never bought before. The project must be quick to catch up with the next growing season. Leanne, a jun-ior procurement staff at the company, assumes that she could skip market analysis stage to save time. Is this assumption reasonable?
- A. No, the company assesses supplier's performance solely based on market analysis
- B. Yes, the company has extensive experience in purchasing tractor
- C. No, market analysis will inform the company of the pricing as well as latest technology trends
- D. Yes, Leanne just needs to purchase the tractor from her friend's company
Answer: C
Explanation:
Market analysis is a stage in CIPS Procurement and Supply Cycle. This stage informs the purchaser about the number of suppliers, the average pricing, and product trends. Even urgent purchase should undergo market analysis. Without undertaking this stage, the buying organisation may not purchase the right product, or they may purchase at higher price.
NEW QUESTION # 85
Why should the buying organisation require the supplier to carry out acceptance testing?
- A. To see whether the supplier engages in unethical business practice
- B. To get the approval from the senior management
- C. To check whether the product matches the specification
- D. To compare between the account payables and account receivables
Answer: C
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.
NEW QUESTION # 86
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?
- A. Yes, because this will help compare alternatives and options
- B. Yes, because this will assist the purchase order
- C. No, because this can lead to business-focused thinking
- D. No, because risk consideration is not John's responsibility
Answer: A
Explanation:
Detailed Explanation: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.
NEW QUESTION # 87
Which of the following sources of information are considered as primary data? Select TWO that apply.
- A. RFI
- B. The collection of data from surveying customers
- C. Commercial publishers of market reports
- D. The information about specific market sectors from trade associations
- E. Reports in business magazines
Answer: A,B
Explanation:
The aim of this question is to check students' understanding of different types of data. There are 2 types of data:
- Primary data is the collection of original or raw data which are generated from field research. In this case, only RFI and surveys from customers are considered as primary data.
- On the other hand, secondary data is public information that has been collected by others. It is typically free or inexpensive to obtain and can act as a strong foundation to any research project - provided you know where to find it and how to judge its worth and relevance. Examples of secondary data are government statistics, industry associations, trade publications, published market reports, etc.
Reference:
LO 1, AC 1.2
NEW QUESTION # 88
Buyers can ascertain the prices by examining information provided by primary and secondary sources of market data. Which of the following is a secondary source of market data?
- A. Supplier prices provided on price comparison websites
- B. Historical records of supplier prices on the buyer's database
- C. Suppliers' prices provided on the buyer's request for quotation
- D. Price brochures provided by the supplier's sales team
Answer: A
Explanation:
Detailed Explanation:Price comparison websites are secondary sources as they aggregate data collected from multiple suppliers. Primary sources (like RFQs and brochures) come directly from the supplier.
Reference: CIPS Level 4, Market Data Analysis.
NEW QUESTION # 89
Which type of specification is less time-consuming to develop?
- A. Outcome-based specification
- B. Conformance specification
- C. Design specification
- D. Technical drawings
Answer: A
Explanation:
There are two major types of specification: conformance and performance specifications. They have the following characteristics:
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Since performance specification is often a list of outputs or outcomes, it usually takes less time to develop than conformance specification.
NEW QUESTION # 90
A procurement manager includes provision on recovery from natural disaster into a through-life specification. Some suppliers suppose that provision is unnecessary. Is procurement manager's action justified?
- A. No, because this provision will incur unnecessary cost to supplier
- B. Yes, because the regulations require contract to have recovery provision
- C. No, because with current technology, natural disaster can't disrupt supply chain.
- D. Yes, because natural disaster may cause risks in organisation's supply chain
Answer: D
Explanation:
Risks like natural disasters - fire, flood, or weather-related event, and cyber-attacks can disrupt the supply chain seriously. Threats and disruptions mean a loss of revenue and higher costs, which leads to a drop in profitability. And businesses can't rely on insurance alone because it doesn't cover all the costs and the customers who move to the competition. Risks must be identified early and supplier should have a plan that ensures continuous operations during disasters.
There are several steps many companies must follow to develop a solid business continuity plan. They include:
- Business Impact Analysis: Here, the business will identify functions and related resources that are time-sensitive. (More on this below.)
- Recovery: In this portion, the business must identify and implement steps to recover critical business functions.
- Organization: A continuity team must be created. This team will devise a plan to manage the disruption.
- Training: The continuity team must be trained and tested. Members of the team should also complete exercises that go over the plan and strategies.
Reference:
LO 3, AC 3.2
NEW QUESTION # 91
GSC Ltd is a manufacturer of car parts. To accommodate growing demands of electric cars, the company is developing a new component which requires different type of steel. The project team estimates that the component will be ready for production in 1.5 years. Until then, they need to keep the production busy.
After checking the inventory records, the production team sees that the company has 3 months of stock. The lead time for each batch is two months. Which of the following should be a priority ac-tion of the company?
- A. Create new specification to current supplier
- B. Standardise the specification
- C. Make a call-off order to current supplier
- D. Create new specification to new supplier
Answer: C
Explanation:
The scenario is very long with many distracting data. Students need to read carefully and use their experience to solve this problem.
The company is developing a new component which requires different type of material. But this component will not be available for mass production in 1.5 years. This means the company still needs to produce the current components with current materials until the development is finished. They must continue purchase the materials from current supplier through call-off orders. This situation is an example of straight re-buy.
NEW QUESTION # 92
The procurement team of an IT hardware manufacturer has been set a target by senior management to reduce the rates paid to the sole supplier of a new and innovative power-saving battery. Which action should the procurement team first consider?
- A. Offering a framework agreement
- B. Offering economies of scale
- C. Agreeing rebate thresholds
- D. Dual or multiple sourcing
Answer: D
Explanation:
Detailed Explanation:Dual or multiple sourcing introduces competition, reducing the sole supplier's bargaining power and leading to cost reductions. Framework agreements (A) or economies of scale (D) may not address the immediate need to reduce rates. Reference: CIPS Level 4, Sourcing Strategies.
NEW QUESTION # 93
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. No, because payback period can be only used to calculate the depreciation of a fixed asset
- B. Yes, because payback period shows how long the firm recovers the investment
- C. No, because payback period doesn't take into account price fluctuations
- D. Yes, because it takes everything into account
Answer: B
Explanation:
There are many factors that need to be considered when making a business decision. Costs and benefits are among those factor. To estimate the length of time in which an investment reaches a break-even point, businesses often use the payback period. The payback period refers to the amount of time it takes to recover the cost of an investment.
'Yes, because it takes everything into account': It ignores the time value of money (TVM), unlike other methods of capital budgeting such as net present value (NPV), internal rate of return (IRR), and discounted cash flow.
'No, because payback period doesn't take into account price fluctuations': Though it doesn't take into account price fluctuation, payback period is still useful in financial and capital budgeting.
'No, because payback period can be only used to calculate the depreciation of a fixed asset': Payback period only calculates the length of time in which the benefits of a charge repay its costs.
LO 1, AC 1.3
NEW QUESTION # 94
Facing fiercer competition at home and abroad, IKEA, the leading furniture retailer, needs to im-prove its competitiveness. In order to do this, IKEA must decrease operating costs and improve quality of current and new retail stores. The company establishes a project team. The job of the team is to collect data on performance from multiple stores in several countries, then select the best performing one. The team will work closely with best performing store and study its processes. After the research, the team will recommend best practices to other retail stores. IKEA management can also apply these practices to new stores in the future. Which of the following correctly describe the process undertaken by IKEA project team?
- A. Competitive benchmarking
- B. Internal audit
- C. Site visit
- D. Internal benchmarking
Answer: D
Explanation:
Basically, IKEA project team is undertaking the following process:
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This is a typical benchmarking process. Benchmarking is defined as the process of measuring products, services, and processes against those of organizations known to be leaders in one or more aspects of their operations. Benchmarking provides necessary insights to help you understand how your organization compares with similar organizations, even if they are in a different business or have a different group of customers.
In the scenario, benchmarking process is undertaken within subsidiaries of IKEA, thus it is internal.
NEW QUESTION # 95
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CIPS L4M2 certification exam is a comprehensive exam that covers a broad range of topics related to defining business needs. It includes topics such as requirements gathering and analysis, stakeholder management, business process modeling, and solution evaluation. L4M2 exam is recognized globally and is an industry-standard certification that demonstrates a candidate's expertise and competence in the field of business analysis. Passing L4M2 exam will not only enhance the candidate's knowledge and skills but will also open up new career opportunities and provide a competitive edge in the job market.
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