Test L4M2 Book, Associate L4M2 Level Exam

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CIPS L4M2 Exam Syllabus Topics:

SectionWeightObjectives
Market management in procurement and supply20-25%- Analyse market structures and competition
  • 1. Impact of market structure on procurement strategies
  • 2. Perfect competition, monopoly, oligopoly, monopolistic competition
- Assess market forces and trends
  • 1. Supply and demand dynamics
  • 2. Technological, legal, economic, social factors
  • 3. Global vs local market conditions
- Evaluate market information sources
  • 1. Supplier intelligence and market research
  • 2. Industry reports, government data, trade journals
Use specifications in procurement and supply20-25%- Advantages and limitations of specification types
  • 1. Risk, cost, flexibility, supplier innovation impact
- Sources for developing specifications
  • 1. Internal stakeholders, technical experts, standards bodies
  • 2. Suppliers, industry benchmarks, regulatory requirements
- Types of specifications
  • 1. Conformance vs performance specifications
  • 2. Drawings, samples, brands, technical standards
  • 3. Output/outcome-based specifications
Stakeholder management in defining needs15-20%- Communicate and consult with stakeholders
  • 1. Methods for gathering requirements
  • 2. Resolving conflicting requirements
- Align needs with organisational objectives
  • 1. Strategic alignment and value contribution
- Identify and classify stakeholders
  • 1. Power/interest matrix and engagement strategies
  • 2. Internal vs external stakeholders
Devise a business case for requirements sourced externally20-25%- Influence of business needs on procurement decisions
  • 1. Types of purchase: new, modified rebuy, straight re-buy
  • 2. Impact of business needs on purchase types
  • 3. Procurement's role in developing business cases
- Criteria for creating business cases
  • 1. Benchmarking requirements
  • 2. Costs, benefits, options, alignment, timescales
- Estimate costs and prices for procurement activities
  • 1. Cost estimation and budgeting methods
  • 2. Total cost of ownership / whole life costing
  • 3. Market data sources for cost/price information
  • 4. Direct and indirect costs
- Interpret financial budgets for purchase control
  • 1. Cash flow and cost entries
  • 2. Purpose and structure of budgets
  • 3. Budget performance and variance management
Legal and regulatory considerations10-15%- Legislation affecting requirements definition
  • 1. Procurement regulations, competition law, standards
- Sustainability and ethical requirements
  • 1. Environmental, social, ethical criteria

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CIPS Defining Business Needs Sample Questions (Q140-Q145):

NEW QUESTION # 140
Which type of specification is less time-consuming to develop?

Answer: C

Explanation:
There are two major types of specification: conformance and performance specifications. They have the following characteristics:
Table Description automatically generated

Since performance specification is often a list of outputs or outcomes, it usually takes less time to develop than conformance specification.
Reference: CIPS study guide page 116-124


NEW QUESTION # 141
British Steel needs to source a set of instruments that will improve quality of steel. Without these instruments British Steel will loss control of the temperature. The bucket may freeze up, or if it is too hot it leaks out of the casting process, damaging the machine. There is limited supply on the market and quality varies greatly.
Which of the following will be the most appropriate managing approach to procure these items?

Answer: A

Explanation:
The instrument plays a crucial role in steel manufacturing because it presents in the majority of products, in which case lacking this instrument would have significant impact on the organisation's output (production lines stop or damaging other machine). Otherwise, the risk of supply is high because there is limitation in supply. Therefore, it is considered as a strategic item in term of Kraljic's portfolio matrix. Procurement manager should form partnership with suppliers to maximise the value.
The following graph illustrates Kraljic's portfolio matrix:


NEW QUESTION # 142
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...?

Answer: B

Explanation:
As you can see from the scenario, the procurement manager is suggesting to use cost plus pricing arrangement.
A cost-plus contract is an agreement to reimburse a company for expenses incurred plus a specific amount of profit, usually stated as a percentage of the contract's full price. These type of contracts are primarily used in construction where the buyer assumes some of the risk but also provides a degree of flexibility to the contractor.
Cost-plus contracts can be separated into four categories. They each allow for the reimbursement of costs as well as an additional amount for profit:
1. Cost-plus award fee contracts allow the contractor to be awarded a fee usually for good per-formance.
2. Cost-plus fixed-fee contracts cover both direct and indirect costs, in addition to a fixed fee.
3. Cost-plus incentive fee contracts happen when the contractor is given a fee if his or her perfor-mance meets or exceeds expectations.
4. Cost-plus percent-of-cost contracts allow the amount of reimbursement to rise if the contrac-tor's costs rise.
In the scenario, the procurement manager suggests a pricing structure that covers supplier's costs and adds 10% markup. This is cost-plus fixed-percentage.
Reference:
- Cost-Plus Contract Definition (investopedia.com)
- CIPS study guide page 30-36
LO 1, AC 1.2


NEW QUESTION # 143
Variances occur when there are differences between the budgeted costs and the actual costs. When are labour cost variances likely to arise?
* When the sales prices change over time due to inflation
* When there is more overtime than is expected
* When a different wage grade of worker is used to complete a task than was planned for
* When the supplier changes from manual to electronic invoicing systems for all transactions

Answer: C


NEW QUESTION # 144
Which of the following are advantages of zero-based financial budgeting?
Use of previous year figures
Emphasis on short-term planning
Budget treated as flexible
Focus on operational issues

Answer: A

Explanation:
Detailed Explanation:
Zero-based budgeting emphasizes starting from scratch and justifying all expenses.
3 (Budget flexibility): Ensures resources are allocated dynamically based on needs.
4 (Focus on operational issues): Encourages alignment with operational priorities rather than historical trends.
Using prior figures (1) is contrary to zero-based budgeting principles. Reference: CIPS Level 4, Financial Planning and Budgeting.


NEW QUESTION # 145
......

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