CIPS Level 4 Module 2 Exam Questions L4M2 Sample Questions

1. Sealines Inc is developing its fleet of cargo ships. The company is planning to build a new ship powered by natural gas. Brian, the procurement manager at Sealines, suggests the project team to develop a through-life specification before engaging with the supplier.

Is this a correct approach?

2. Which of the following activities are considered as secondary activities of an organization? Select TWO that apply

3. A procurement manager is writing a conformance specification for a non-core component. She thinks that if the requirements in specification are higher than ISO standards, her company can achieve greater cost-savings.

Is the procurement manager’s opinion correct?

4. Competitors are increasingly deploying robotics and automation to boost productivity.

Which of the below business sectors does EV Inc belong to?

5. A procurement manager is discussing with other stakeholders about the scope and the implementation of the upcoming construction project. A stakeholder argues that the construction projects are often risky as the overall scope of the work can't be accurately estimated from the beginning. Furthermore, the project spans over a long period, the costs of materials can fluctuate widely. The procurement manager suggests that the pricing structure should be able to cover the supplier's costs plus 10% markup on total costs.

This arrangement is known as...?

6. 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?

7. GE has developed TurboProp engine that is made from over 850 metal parts. These parts are sourced from many suppliers. Value of spend on these parts make up 73% of total spend. Any delay in receiving a part will cause a bottleneck around the production of the engine.

Which of the following should be the best course of action of GE's CPO?

8. Which of the following is the best definition of target costing?

9. Why should procurement professionals develop business case before seeking approval to purchase capital equipment?

10. Which of the following is a tool to define roles and responsibilities of a project team?

11. Which of the following is the disadvantage of embedding standards in a specification?

12. Which of the following factors are likely to be direct barriers to a new entrant in a supply market?

13. Which of the following are typical environmental considerations throughout the contract life cycle? Select the TWO that apply.

14. Which of the following indicates types of waste that procurement department concentrates on when adopting Lean methods?

15. A hospital extensively spends on medical and implantable devices, medical, surgical and pharma-ceutical supplies, costs of supplies related to buildings and maintenance operations. Hospital’s procurement manager suggests that the hospital has an opportunity to reduce operational costs by reducing variation of medical devices and pharmaceutical supplies.

Which of the following best describe the procurement manager's suggestion?

16. Which of the following problems may be identified as closed problems? Select TWO that apply:

17. Robert is a senior buyer at MMC Construction Ltd. His company is doing multiple development projects in the country, which increases procurement workload significantly. Meanwhile, most of the tasks are handled manually, which causes bottlenecks in the workflows. The procurement team is overwhelmed by the workload and complains from other departments. From previous experience, Robert knows that electronic system may help his procurement team. He writes a business case to submit to the senior management, in which he insists on the possible productivity improvement by adopting e-system in procurement.

Is Robert's action reasonable?

18. A company is analysing its existing product's components and aims at reducing costs without damaging customer value proposition. They want to check which components are critical and which are unnecessary.

Which of the following should be adopted by the company?

19. Thani Ltd is a fast growing logistics company with a fleet of 20 tractors. To meet Net Zero objec-tive, the company needs to electrify its fleet. Angelica is assigned to investigate the market price of electrifying services. After the investigation, she realises that the current market price is very expensive and unsustainable for her company. She decides to break down the costs before negotiating with the suppliers.

Which internal stakeholders may help Angelica estimate the breakdown of costs? Select TWO that apply.

20. A procurement team is categorising their purchased items into four quadrants of Kraljic's supply chain portfolio matrix. They realise that there are some low-value items which come from very few suppliers in the market. The organisation is critically dependent on these suppliers. The team plans to reduce the dependence by finding alternative sources.

Is this a right course of action?

21. Apple’s CPO is planning a budget for purchasing carbon-free aluminium next year. There are 27.4 tonnes of aluminum in stock, while Apple will need 200 tonnes for production next year and double inventory for production in the following year.

How much aluminum will Apple need to purchase in next year?

22. Which of the following is a challenge of making a business case for straight re-buys?

23. When a procurement manager considers a substitution, the number and nature of additional func-tions that substitute provides should be taken into account carefully.

Which of the following ratio could help the procurement manager to make the right decision?

24. Which kind of these following costs belong to fixed costs? Select TWO that apply.

25. What does the acronym RAQSCI stand for?

26. A procurement manager is requested to source a major component. She needs information on sup-pliers’ direct and indirect cost, fixed and variable costs to prepare for negotiations. Therefore, she collects 17 annual reports from potential suppliers who are competing in the same industry.

In order to estimate an approximate value of fixed and variable costs in that industry, which of the following technique should be adopted by the procurement manager?

27. Which of the following are typically reasons why an organisation implements value analysis? Select TWO that apply:

28. 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?

29. 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?

30. Which of the following bodies provides standards for the products and services in the US?

31. When should procurement professional tolerate a risk?

32. 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...?

33. Which of the following is an useful tool for value engineering?

34. 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?

35. Why should the buying organisation require the supplier to carry out acceptance testing?

36. The purchase is made in emergency

37. A purchaser is looking for alternative supplies if there is a major disruption to their supply chain, including logistics, manufacturing and all support services.

Which of the following method is that purchaser applying?

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

39. Threat of backward integration is significant

40. To strengthen its market presence, ABC Group decided to develop a new product. A cross-functional team was formed to discuss the scope and the functions of the product. They will also survey the potential customers to see what they like, what they love, and what they dislike.

What is this process called?

41. This is the information on an organisation’s activities over the past year

• Sale were $5,000,000. The value of accounts receivable was $450,000 at the start of the year and $525,000 at the end of the year

• The value of direct costs was $2,500,000 and 75% of this was bought on credit

• Indirect costs were $3,000,000 and 25% of this was bought on credit

• During the year the organization spent $1,500,000 on new assets and sold $150,000 of old assets. $1,000,000 of the spend on assets was funded by a bank loan

• The organization declared a dividend of $200,000 at the end of the year but this was not paid for another two months

• Opening balance was $175,000

Which of the following is the bank balance of that organization at the end of the year?

42. What is the output of regression analysis?

43. Information security

2 and 4 only

44. Standardisation

45. A buying organisation may not have technical capability to produce a highly complex specification.

Which of the following are sources of information that can be used to create the specification? Select TWO that apply

46. Andrew is responsible for procurement of capital assets at Lumber Ltd. He is devising new business case for the purchase of a new band saw. The purchase price of the saw is $50,000. Andrew estimates that the machine will generate $10,000 per year of net cash flow.

What is the payback period of this band saw?

47. Department for Transport (DfT) needs to buy new locomotives to expand the capacity of trains fleet. In 2009, they were criticized for beginning the procurement “without any clear idea of how many trains would be needed, which routes they would run on and what form of power would be required”.

What should procurement manager of DfT do first to manage risk in making the specification?

48. XYZ Ltd is a large supermarket chain which operates mainly in the UK and Europe. Their custom-ers are increasingly concerned about sustainability. Therefore, procurement manager is required to source the products from suppliers who have good environmental performance.

Which of the fol-lowing can be an assurance that the supplier has procedures and policies to enhance its environmental performance?

49. A drawing is an example of…?

50. Which of the following areas is specified by ISO/IEC 27001 family?