L4M2 CIPS Defining Business Needs exact Exam Questions

Defining Business Needs

Last Update 19 hours ago Total Questions : 237

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Question # 4

Which of the following are likely to be disadvantages of using outcome-based specifications? Select THREE that apply

Time consuming to produce

Stifling innovation

Difficulty to measure performance

Long time delay between action and result

Responsibility for product failure falling to buyer

Ambiguity of outcome

Question # 5

Which of the following are considered as direct costs in a construction company? Select TWO op-tions

Raw materials

An employee is hired to work on a project, either exclusively or for an assigned number of hours

The materials and supplies needed for the company’s day-to-day operations.

Advertising and marketing communication

Clerical assistants who maintain the office

Answer:

A, B

Explanation:

Explanation

Direct costs are directly associated with the production of a good or service. In this question, 'An employee is hired to work on a project, either exclusively or for an assigned number of hours' and 'Raw materials' are directly related to producing the product.

Indirect costs are the general costs of the organisation - these costs cannot easily be attributed to specific products or services (also known as overheads). 'The materials and supplies needed for the company’s day-to-day operations' or 'Clerical assistants who maintain the office' or 'Advertising and marketing communication' is example of indirect cost.

[Reference: CIPS study guide page 25-26, LO 1, AC 1.2, QUESTIO NO: 8, Which of the following are most likely to increase the buyer’s bargaining power?, 1. Buyers are price sensitive, 2. High set-up cost for new entrants, 3. Threat of forward integration is high, 4. Threat of backward integration is significant, A. 3 and 4 only, B. 2 and 3 only, C. 1 and 4 only, D. 2 and 4 only, Answer: C, , Explanation, Price sensitivity is the degree to which the price of a product affects consumers' purchasing behaviours. Buyer power will be stronger if buying organisation are price sensitive and vice versa., Backward integration is a form of vertical integration in which a buying organisation expands its role to fulfil tasks formerly completed by businesses up the supply chain. Buyer power is strong if threat of backward integration is high., Set-up cost is a determinant of threat of new entry. Some industries require very expensive assets in order to make products. The financial risk of entering the industry and not succeeding can deter many potential new entrants. The fewer new entrants, the fewer available substitutes, then the bar-gaining power of buyer can be negatively affected., Forward integration is a business strategy that involves a form of vertical integration whereby business activities are expanded to include control of the direct distribution or supply of a compa-ny's products. Threat of forward integration is a determinant of supplier's bargaining power., Reference: CIPS study guide page 88-91, LO 2, AC 2.2]

Question # 6

Jasmine identified a possible new supplier that offers commercial improvements in her category of spend. She decided to put forward a business case to justify the necessity for a new supplier assessment and audit with the aim of adding the supplier to the approved list. Jasmine decided to carry out a cost-benefits analysis. Is this the right approach for Jasmine to use?

No, cost-benefits analysis should be done by accounts only

Yes, cost-benefits analysis will show if benefits offered outweigh the cost of the approval

Yes, cost-benefits analysis is a regulatory requirement for any business case

No, cost-benefits analysis is not required; she should request supplier approval

Question # 7

Which of the following will help the bargaining strength of a buyer?

The buyer has the option to make the product in-house

There are a limited number of suppliers available to the buyer

The buyer's switching costs are high

The buyer's spend is a high proportion of the supplier's revenue

1 and 2 only

2 and 4 only

1 and 4 only

2 and 3 only

Question # 8

Procurement provides the following information to a business case ...

Estimated costs of bought-in goods

Engineering specifications

Service level requirements

Internal recruitment requirements

Question # 9

ABC Ltd has recently set up a stationery contract with a large stationery provider, obtaining fixed prices on core stationery items. The brochures have been distributed within ABC Ltd and one of the key users wants to order a corner desk and office chair from the brochure. Is this within scope?

No, because the contract is for stationery only and not furniture

No, because the corner desk wouldn't match existing furniture

Yes, because the contract is with the company and not just stationery

Yes, because the office equipment is in the brochure and must be covered

Question # 10

A buyer can use sources of information to review indirect costs associated with the manufacture of goods to support supplier negotiations. Is this statement true?

Yes, because indirect costs are always variable

No, because the only information available is for direct costs

No, because the supplier's quotation is the only source of information

Yes, because the buyer can understand the cost build-up of the goods