2022 Latest L4M5 Exam Dumps Recently Updated 165 Questions
CIPS L4M5 Real 2022 Braindumps Mock Exam Dumps
CIPS L4M5 Exam Syllabus Topics:
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NEW QUESTION 45
Understanding supplier's mark-up and margin can provide procurement professional a comprehensive insight into supplier's net profits. Is this statement true?
- A. No, because mark-up and margin inform little about supplier's net profit
- B. Yes, becausesupplier's mark-up and margin are two most valuable sources of information to procurement
- C. Yes,because these are two indicators of supplier's future prospect
- D. No, because margin is enough to tell procurement about supplier's profitability
Answer: A
Explanation:
Explanation
Mark-up and margin allow supplier to make gross profit. Remember that every supplier operates under different cost structures and some are set up to be most profitableat a particular level of volume, so it is dangerous to assume all suppliers can survive on a lower margin if their volume increases. Intelligent buyers understand that mark-up and margin may define gross profits, but they tell you very little about a supplier's net profits.
LO 2, AC 2.1
NEW QUESTION 46
Which of thefollowing are signs indicating that TOP is using coercive power in commercial negotiation?
Select TWO that apply.
- A. Demonstrating fairness and respect
- B. Use of guilt
- C. Withdrawal of benefits
- D. Positive references
- E. Technical expertise
Answer: B,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 47
Which of the following may help the procurement professional increase expert power in commercial negotiation? Select TWO that apply.
- A. Personality
- B. Ability to compensation
- C. Official positions
- D. Expertise knowledge
- E. Insights
Answer: D,E
Explanation:
Expert power is based on a person's high levels of skill and knowledge, formal training, qualifications and experience in aparticular procurement category would give someone expert status and mean that in negotiation their voice is listened to as a more objective, informed knowledge leader. Expert power is based on facts, knowledge, research, insight and study.
Legitimate power comes from rules, formal authority, organisation rank, staff rate or official position held.
Reward power comes from one person's ability to compensate or reward another for compliance.
Referent power stems from their personality, way of engaging with others and habit of acting in a way that is in line with a strong set of values and principles.
NEW QUESTION 48
Which of the following are most likely to be direct costs of a steel manufacturer? Select THREE that apply.
- A. Insurance for production lines
- B. Hourly production wages
- C. Coal
- D. Cleaning services
- E. Seniormanagement salary
- F. Scrap metal
Answer: B,C,F
Explanation:
Direct costs are those costs of a product/service directly attributable/traceable to its production. Examples of direct costsincluding the following:
Materials and services bought-in: In steel manufacturer, raw materials are iron ores, scrap metal, coals, etc Labour or wages: money paid to staff for the work involved in producing the product.
Other expenses: other charges incurred that can be specifically attributed to a particular product, batch or service
NEW QUESTION 49
Which of the following are behaviours that builds trust between the buyer and the supplier in business relationship? Select TWO that apply.
- A. Over-inflated contingency funds
- B. Allowing supplier to involve in early product development
- C. Tendency to blame other party
- D. Commercial espionage
- E. Conducting transparent procurement process
Answer: B,E
Explanation:
Trust-building behaviours are as following:
Joint-effort issue resolution
Open sharing of information
Open and honest discussion on root cause of failures
Joint planning focusing on value for money and risk sharing
Commercial transparency and co-proposition of cost reduction and service improvement programmes Joint recognition and celebration of successes
NEW QUESTION 50
A procurement professional is negotiating with a supplier on cleaning service. She realises that there are huge cost-saving opportunities if the supplier agrees to reduce its mark-up and unnecessary employee benefits.
Supplier's mark-up and employee benefits are examples of which of the following?
- A. Spend cube
- B. Spend waterfall
- C. Spend tree
- D. Addressable spend
Answer: D
Explanation:
Explanation
A key consideration when seeking to negotiate prices is to establish what proportion of the spend is addressable by procurement action such as negotiation. Addressability of spend is influenceable through negotiations or application of other saving effort or leverage with suppliers.
LO 2, AC 2.1
NEW QUESTION 51
An oil refinery plant imports much of its crude oil from overseas. A procurement manager in the refinery suggests that fixing the crude oil contract price for 36 monthswould be beneficial for the company. Would this be a right thing to do?
- A. Yes, financial budgeting task would be a lot easier with fixed pricing arrangement
- B. Yes, the supplier would bear the risk when the material price increased
- C. No, fixed price should be only applied to contracts that last 60 months or longer
- D. No, the refinery would not be able to reap the benefits from falling commodity price and currency rates
Answer: D
Explanation:
Explanation
Fixed price contract is the contract in which the price is static throughout the contract period. A fixed-price contract may give certainty to budget and simplify contract management. However, it may lead to other problems since it requires bidders to estimate and bear the financial risks associated with price escalations. If the estimates are too high or events do not materialize, the buyer will pay a steep price that may affect the economy and efficiency of the contract. In the worst case, it may mean that the bid price is then above budget and may lead to a reduction in the requirements or rebidding. If the estimates are too low, it may appear as an abnormally low bid and disrupt contract execution.
On the other hand, price adjustment provisions include formulas designed to address problems, and can protect both theborrower and contractors from price fluctuations. Price adjustment formulas allow contractors to offer more realistic prices at the time of bidding. Despite concerns that they may lead to budget uncertainties, price adjustment formulas will estimate the actual cost implications that will be encountered. They use indexes that can be used for cost projection.
According to Asia Development Bank (ADB), any contract with a delivery or completion period beyond 18 months should contain an appropriate price adjustment clause.
In the scenario, the crude oil contract is planned to last 36 months. This period is pretty long with a fluctuating commodity. Therefore, the company should use price adjustment agreement.
NEW QUESTION 52
Which of the following can help both parties to break the vicious cycle of blame when a relationship needs repairing? Select TWO that apply.
- A. Focusing onpositions
- B. Constant shadowing and oversights
- C. Both parties understand each other's goals
- D. Emotional-based assessment
- E. Conflict management skills
Answer: C,E
Explanation:
In order to break vicious cycle of blame, procurement will need to use their negotiation and conflict management skills,adopting a collaborative and integrative approach. Your first action should be to establish the facts that led to the situation where the relationship broke down. Most day-to-day relationship between buying organisations and suppliers do not of course involve procurement staff, so you will need to consult with your business partners internally to establish their point of view of where the issue and sources of conflict are. You should also contact the supplier and get their side of the story - this is particularly to when you have previously identified the supplier as critical or otherwise important to your operations. Ideally you will be able to apply principled negotiation here, separating the people from the issue, focusing on interests and not positions,and then looking for options of mutual benefits.
NEW QUESTION 53
Which of the following are typical characteristics of activity-based costing (ABC) method? Select TWO that apply.
- A. ABC has tended to over cost products on long runs and under cost those on short runs
- B. Variable and all related overhead expenses are specifically assigned to a business activity
- C. ABC provides the information required to take action and realise improvements
- D. Limited understanding of true costs incurred
- E. Costs are allocated based on volume
Answer: B,C
Explanation:
Activity-based costing is an alternative approach to traditional absorption costing. The characteristics of these two methods are illustrated in the graph below:
Graphical user interface, text, chat or text message, website Description automatically generated
NEW QUESTION 54
A good negotiator invests time in understanding the needs of the individuals in a negotiation. Is this statement true?
- A. Yes, because individuals' needs always unify with their own organisation's needs and wants
- B. No, becausenegotiator should attempt to satisfy the needs of the other organisation only
- C. Yes, because individual needs largely influence the outcomes of the negotiation
- D. No, because satisfying individual needs will lead to conflict of interest and unethical practices
Answer: C
Explanation:
Skilled negotiators seek to understand the needs of the other parties, as well as their own. In doing so, it allows them to determine a strategy that their own needs are met. Failing to understand the other party's needs is one of the most common reason for an unsuccessful negotiation. In the commercial negotiation, procurement team does not negotiate with organisation, they negotiate with individuals. It is therefore important to recognise that there are two levels of needs:
The organisation - What the organisation wants to achieve. This is generally well stated and understood The individual - what is in it for the individual? This is generally not stated, rarely discussed, but very motivational. It is vitally important therefore that time is invested in understanding the needs of the individual Skilled negotiators are aware of the needs that occur at both levels, and develop creative options and strategies that attempt to satisfy these needs.
NEW QUESTION 55
Which of the following is definition of elasticity of demand in microeconomics?
- A. The percentagechange in income divided by the percentage change in the quantity demanded
- B. Thepercentage change in price of a good divided by the percentage change in the quantity demanded of that good.
- C. The percentage change in the quantity demanded divided by the percentage change in income
- D. The percentage change in the quantity demanded of a good divided by the percentage change in the price of that good
Answer: D
Explanation:
Elasticity refers to the responsiveness of quantity demanded or quantity supplied to a change in price or another factor:
The price of a product can be described as being elastic if a small change in price leads to a big change in demand.
The price of a product can be described as being inelastic if a big change in price leads to a small change in demand.
The formulae of elasticity of demand is known as the following:
Text Description automatically generated with low confidence
NEW QUESTION 56
Which of the following is the true statement?
- A. All connected stakeholders have a low level of impact on procurement negotiations
- B. Internal stakeholder support will be important for both negotiation and contract performance
- C. Commercial negotiation objectives should be driven by just the instincts of procurement
- D. External stakeholders such as suppliers can largely influence an organisation's procurement negotiations
Answer: B
Explanation:
Internal stakeholder support will be important not just at the initial negotiation of the contract, but potentially throughout the life of the contract right through to exit.
As a general rule, connected stakeholders (with the exception of suppliers) have a low level of influence on procurement negotiations.
Suppliers are connected stakeholders who have contractual relationships with the organisation.
Commercial negotiation objective should be driven by thebusiness needs of the organisation, and not just the instinct of procurement.
NEW QUESTION 57
Sumitomo Rubber Industries (SRI) is a Japan-based tyre manufacturer. In order to increase production, SRI is sourcing rubber from Southeast Asian firms. Which of the following micro factors are most likely to shift the balance of power to supplier? Select TWO that apply
- A. SRI's purchase amount makes significant proportion of supplier revenue
- B. SRI sets up its own rubber plantation
- C. Costs of changing suppliers are high
- D. Rubber from different suppliers is virtually similar
- E. There are no close substitutes for rubber
Answer: C,E
Explanation:
There are many factors that can influence the balance of power in a negotiation. These factors are classified into 3 levels:
Macro level: STEEPLE framework: social, technological, economic, environment, political, legal and ethical Micro level: Porter's five forces:
Diagram Description automatically generated
One-to-one buyer-supplier dynamics.
The question asks about the micro factors that increases supplier's bargaining power. Among 5 answers, only 2 are likely to increase buyer's power:
There are no close substitutes for rubber: the buyer has to buy rubber, not any other material.
Costs of changing suppliers are high: buyer entails a large barrier if they want to switch supplier.
Other answers cannot be correct because:
SRI sets up its own rubber plantation: Buyer secures its own supply
SRI's purchase amount makes significant proportion of supplier revenue: Suppliers are reliant on buyer. If the buyer stops buying from them, they can face serious cash flow problems Rubber from different suppliers is virtually similar: undifferentiated product would shift the power balance towards buyer.
NEW QUESTION 58
Which type of power is considered the opposite of coercive power?
- A. Reward power
- B. Expert power
- C. Referent power
- D. Informational power
Answer: A
Explanation:
Explanation
The coercive power comes from the belief that a person can punishothers for non-compliance. It can be considered as opposite to reward power, which results from one person's ability to compensate or reward another for compliance.
LO 1, AC 1.3
NEW QUESTION 59
Which of the following statements about oligopoly isincorrect?
- A. A few firms play an important role in the sale of a product
- B. Oligopolistic firms recognize their interdependence
- 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 60
Should a buyer use closed questions in a negotiation?
- A. Yes, because closed questions help to reconfirm certain facts
- B. Yes, because they urge the supplier to provide more detailedExplanation::
- C. No, the buyer should maximise the use of open questions
- D. No, supplier will consider closed questions as provocation
Answer: A
Explanation:
Asking questions the right way is both an art and a science. Ask the question the wrong way, and the other negotiator might act like a turtle, becoming defensive and withdrawing into their shell. Ask the question the right way, and the other negotiator might "spill the beans.".
Closed Questions: How and when to use them?
Closed questions are those thatrequire a short and focused answer, and are especially helpful in the beginning stages of the negotiation to encourage interaction. They can be used to clarify a point, or to reconfirm certain facts. For example, you can use a closed question to confirm the amount of units the company can produce in a week, or to clarify that what they are really saying is that they don't feel comfortable outsourcing their accounts to India. Most closed questions only require a simple "yes" or "no" response, so there reallyisn't much room for misinterpretation - great for finding out where both you and they stand.
NEW QUESTION 61
XYZ Ltd is importing goods from overseas. They prefer to pay theirsupplier in their own currency. Which of the following is a true statement?
- A. XYZ has an advantage in negotiating discounts if their currency appreciates
- B. Supplier will receive less if XYZ's currency appreciates
- C. XYZ has to pay more if their currency depreciates
- D. XYZ is able to pay less if their currency depreciates
Answer: A
Explanation:
Explanation
The effect of a change of relative exchange rates will be determined by which currency you pay your supplier in.
Table Description automatically generated
LO 2, AC 2.2
NEW QUESTION 62
When is the best time in procurement process in which procurement should get involved so that the cost-saving opportunities are the greatest?
- A. Market consult stage
- B. Specification stage
- C. Post-tender stage
- D. Post-contract stage
Answer: B
Explanation:
Explanation
The earlier procurement get involved in the procurement processes, the better. If procurement are involved in design at the specification stage they can feed in prices and costs to designer so they know the likely budget implication of choices made. Sending in a procurement team to negotiate at or close to the end ofthe procurement process effectively ties their hands and limits their negotiation leverage. This is illustrated in the graph below:
Chart Description automatically generated
LO 2, AC 2.1
NEW QUESTION 63
Which of the following is the internal factor that is taken intoprice of a product?
- A. Exchange rate
- B. Customer tastes
- C. Elasticity
- 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 64
Which of the following is the best description of direct cost?
- A. Direct costs include only raw materials and labour of making the final product
- B. Direct costs include raw materials, labour andoverheads
- C. Direct costs include raw materials, labour and other expenses attributable to the final product
- D. Direct costs are only variable raw materials that constitute a product
Answer: C
Explanation:
Direct costs are those costs of a product/service directly attributable/traceable to its production, for example, the costs of labour and materials directly used to produce the goods/services which the organisation sells.
NEW QUESTION 65
An organisation is developing the specification for a capital purchase project. An important stakeholder has doubt on the draft specification. The buyer invites him to the product function meetings. In these meeting the attendees can raise their concerns, the specification development team takes in all the concerns and adjusts the specification accordingly. What kind of technique is the specification development team using?
- A. Persuasive reasoning
- B. Visionary
- C. Coalition
- D. Directive
Answer: C
Explanation:
In the scenario, anyone who has concerns can join a meeting to raise their thoughts. The project team takes the stakeholders' ideas into account. This isknown as coalition: A group of people or organisations come together and work collaboratively to achieve some goals. Specifically in this scenario, the goal is creating a high-quality and unified specification for an important project.
NEW QUESTION 66
A buying organisation with a low spend but the reputation for paying on-time. In order to increase buyer's leverage in negotiation with suppliers, which of the following should be a priority of this buyer?
- A. Unavailable technical support
- B. Volume separation
- C. Spend concentration
- D. Unclear tender award criteria
Answer: C
Explanation:
Explanation
According to Paul Steele's 'The Seller's Perspective', customer can be classified into 4 categories as below:
To increase theleverage in negotiation, buyer may increase its attractiveness and/or increase spend value. In this scenario, the buyer is already attractive to supplier as it always pays on-time, but the spend is still low. So to have greater leverage, the buyer has toincrease its spend volume by spend concentration. Spend concentration may take many forms as following:
- Vendor base reduction
- Volume pooling
- Volume redistribution
- Volume consolidation across categories
- Standardisation and harmonisation of specifications
- Forming purchasing consortia
Chart, treemap chart Description automatically generated
LO 1, AC 1.3
NEW QUESTION 67
XYZ Ltd decides to go to market for a cleaning contract to service a number of offices. It knows that it will get a price which may, ormay not, be better than the one it is currently paying. To gain leverage in the marketplace, the organisation decides to add other related services to the scope, such as gardening, security and maintenance, which increase the value of the contract. This is an example of which forms of spend consolidation?
- A. Volume pooling
- B. Volume redistribution
- C. Purchasing consortia
- D. Volume consolidation across categories
Answer: D
Explanation:
Explanation
Buying organisation may increase its leverage with suppliers byconcentrating spend. Supplier spend consolidation can take many forms as outlined below:
- Vendor base reduction: straightforward reduction of number of suppliers in any category
- Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
- Volume redistribution: making recommendations following spend analysis to move from one supplier to another
- Volume consolidation across categories: certain purchase requirements may be common across a number of categories. In the scenario, XYZ has combined different categories but closely related to office services into a larger contract so that they can increase their leverage.
- Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
- Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.
LO 1, AC 1.3
NEW QUESTION 68
According to Dr. Mari Sako, which of the following is potentially the weakest trust to be built?
- A. Contractual trust
- B. Competence trust
- C. Charitable trust
- D. Goodwill trust
Answer: A
Explanation:
Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of
3 types of trust in commercial relationship, whichis very useful from the perspective of procurement.
Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.
Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.
Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically.
This is potentially the strongest type of trust, but it takes the longest time to build.
Otherwise, trust also has legal meaning. A trust is a legal document that can be created during a person's lifetime and survive the person's death. A trust can also be created by a will and formed afterdeath. Charitable trusts are trusts which benefit a particular charity or the public in general.
NEW QUESTION 69
Which of thefollowing should be the final step of a negotiation process if both parties cannot reach an agreement?
- A. Celebrating publicly about the deal
- B. Asking TOP for another concession
- C. Reflecting on performance
- D. Tempting TOP to reopen the negotiation
Answer: C
Explanation:
Explanation
Reflecting on performance should become a natural final step in the negotiation process.
'Celebrating publicly about the deal': Public gloating, even in success or failure, if it gets back to the supplier via the press or social media, will likely damage the relationship
'Tempting TOP to reopen the negotiation': whether TOP agrees to reopen the negotiation, procurement should reflect on their achievement and what can be improved.
'Asking TOP for another concession': TOP can agree or rejectthis concession. Eventually, reflecting should be the final step. Procurement can learn a lot from reflection on performance.
LO 3, AC 3.4
NEW QUESTION 70
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