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Learning knowledge is not only to increase the knowledge reserve, but also to understand how to apply it, and to carry out the theories and principles that have been learned into the specific answer environment. Studying for attending Defining Business Needs exam pays attention to the method. The good method often can bring the result with half the effort, therefore we in the examination time, and also should know some test-taking skill. The L4M2 Quiz guide on the basis of summarizing the past years, found that many of the questions, the answers have certain rules can be found, either subjective or objective questions, we can find in the corresponding module of similar things in common.
| Section | Objectives |
|---|---|
| Topic 1: Understand market management in procurement and supply | - Compare the competitive forces that influence markets
|
| Topic 2: Understand the use of specifications in procurement and supply | |
| Topic 3: Understand how to develop a business case for requirements to be sourced from external suppliers | - Analyse how market factors affect procurement |
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NEW QUESTION # 162
Why should the buying organisation require the supplier to carry out acceptance testing?
Answer: A
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 # 163
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?
Answer: C
Explanation:
Public annual reports can be a source of information that helps the procurement professional to analyse an industry's cost and revenue using the line of best fit. Line of best fit is one of the most important outputs of regression analysis. Regression refers to a quantitative measure of the relationship between one or more independent variables and a resulting dependent variable. Regression is of use to professionals in a wide range of fields from science and public service to financial analysis.
In this case, by collecting and analysing 17 annual reports, the procurement manager can find the line of best fit which goes approximately through the middle of the data points with an equal num-ber of data points above and below it.
The slope of the line of best fit is the approximate variable costs the industry. The easiest way to calculate it is to take a point at the right-hand end of the line of best fit and note its cost and output levels. Divide the cost by the output and this gives and approximate figure for the cost per unit of output or variable cost. This gives an approximate value for the industry fixed and variable costs.
Reference:
LO 2, AC 2.3
NEW QUESTION # 164
A company has a lists of items that make up 15% of total spend. These items also do not largely impact on quality of final product. The supply continuity is secured. Which of the following will be the most appropriate managing approach to purchase these items?
Answer: C
Explanation:
Those items make up small portion of spend and the supply risk is low. So it is tactical item according to Kraljic portfolio matrix. Procurement should bundle these items into larger contracts, simplify procurement process.
LO 2, AC 2.1
NEW QUESTION # 165
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?
Answer: A
Explanation:
In this question, you should understand the concept of cash flow and formula of cash flow. Cash flow calculates the physical money moving in and out a company's bank balance. The cash flow from sale activity is:
cash flow from sale = account receivable at beginning of the year + revenue - account receivable at the end of the year = $450,000 + $5,000,000 - $525,000 = $4,925,000
75% of direct costs was bought by credit, therefore, the company spent 25% on direct cost: -$2,500,000*25
/100 = -$625,000
25% of indirect costs was bought on credit. Cash flow out on indirect costs is: -$3,000,000*75/100 =
-$2,250,000
Company spent $1,500,000 on new assets funded by a loan of $1,000,000. Cash flow out from this activity is
-$500,000
Company received $150,000 from selling old assets
Dividends have not been paid for another 2 months, thus, they are not accounted as cash flow out.
The bank balance at the end of the year is: $175,000 + $4,925,000 - $625,000 - $2,250,000 - $500,000 +
$150,000 = $1,875,000
LO 1, AC 1.4
NEW QUESTION # 166
Which of the following is the core of value analysis process?
Answer: C
Explanation:
Value Analysis (VA) is concerned with existing products. It involves a current product being ana-lysed and evaluated by a team, to reduce costs, improve product function or both. Value Analysis exercises use a plan which step-by-step, methodically evaluates the product in a range of areas. These include costs, function, alternative components and design aspects such as ease of manufac-ture and assembly.
According to the Value Methodology standard, there are 6 phases to a Value Analysis:
- Information
- Function Analysis
- Creative
- Evaluation
- Development
- Presentation
1. Information
In this first phase, the team attempts to understand why the project exists and who or what it is to produce.
They obtain project data, present the original design or product concepts, and understand the project scope.
Schedule, costs, budget, risk, and other non-monetary issues are studied until the team is comfortable with the concept of the project, what it is to produce, and who its end users are.
This step also includes things like site visits and meetings with the project team, if required. Project documents like plans, drawings, specifications, and reports are obtained and the value engineering team becomes familiar with them.
2. Function Analysis
This step represents the meat and potatoes (core) of the value analysis. The team attempts to determine the functions the project serves. Functions come in two forms:
- Primary functions are those that represent the reason for the project's existence, for example, a building project might have adequate plumbing as a primary function.
- Secondary functions are those that the project serves without being core to the project. For example, a building project might have as a secondary function maintaining the view of the neighboring building.
The functions are described in verb/noun pairs, such as "supply water to all suites," or "Maintain view of adjacent park." For a project like this, the team should come up with 10 - 15 functions. You might be surprised how many secondary functions exist for most projects. Subject matter experts would be a great resource, but in their absence an appropriate level of brainstorming and analysis are necessary.
The team should also identify value-mismatched functions to focus the improvements on. For ex-ample, maybe a large obstruction is preventing the view of the adjacent park from too many suites resulting in a potential mismatch of the cost vs. functional benefit. This is investigated in the next step.
3. Creative
This phase represents the generation of improvement ideas. The team develops alternative ways that the project can perform the functions that have been identified. At this step, the functions are looked at individually and each one gets a list of alternative ways to perform the function. There is no judging between the importance of the various functions.
4. Evaluation
At this stage, a priority is given to each project improvement idea. The ideas are discussed and potential costs are determined. Once the risk-reward profile of each idea is itemized, the team has determined which ideas are worth implementing into the project or feature.
A few years ago, there was a pedestrian bridge built near my home which was originally designed for emergency vehicles. Although this type of design is standard practice for the bridges of this type, the value engineering team identified that emergency vehicle passage was not needed (verb/noun pair = 'maintain passage for emergency vehicles'). Also, a second major outcome of this value analysis was to change the design to an aesthetic, curved bridge because it was in a prominent location. The redesign of the bridge cost some money but this was more than made up by the cost of the bridge construction. Thus, the value analysis paid for itself about 10 times over in the reduced construction cost, and the bridge was significantly more aesthetic.
5. Development
Once the value improvement options have been whittled down to the ones that make sense, the value engineering team develop the options to the point of passing them back to the original project team. They must be clearly written and explained so that the project owner and stakeholders can understand how it benefits the project and act on it. Any potential negative factors are identified. Potential costs and cost savings are itemized.
6. Presentation
This last phase represents the presentation of the alternatives to the stakeholders. Often value engineering represents a change in the normal practices that people are used to, an "out of the box thinking." Thus the best salesperson on the team is often the best one to do the presentation.
Some typical products of a value engineering analysis are a briefing document, risk analy-sis, present worth analysis, advantages vs. disadvantages, etc.
Reference: CIPS study guide page 163-171
LO 3, AC 3.4
NEW QUESTION # 167
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