CIPS L3M1 Exam Practice Test Instant Access

Question 1

Which of the following would be / should be subject to health and safety legislation?

AAll of them

BSmoking cigarettes inside offices, factories and other buildings

CThe manual lifting of heavy objects

DFloors, passages and stairs should be properly constructed, maintained and kept clear

EThe need for appropriate firefighting equipment in a factory

Answer : A

All of these.

Question 2

'The optimum combination of whole life costs and quality' is one definition of:

AQuality circles

BLife cycle costing

CContractual agreement (in English law)

DValue for money

Answer : D

An earlier widely-used definition of value for money as the right combination of price and quality has been updated to include the notion of whole-life costing.

The other answers shown are simply 'red herrings'.

Question 3

Which of the following might result from increased costs of production (especially wages) without increased demand, so that producers have to increase their prices to maintain profitability?

ADemand-pull inflation

BCost-push inflation

CMonetary inflation

DStagflation

Answer : B

Inflation, in this case, is created by the increased cost of production coming through into the econ-omy.

The other answers are essentially names of alternative types of inflation.

Question 4

A contract clause which entitles the buyer to hold back 5% of the final price for six months to en-sure everything is in order is known as a --------- clause:

ARetention

BRedemption

CIntention

DRetainer

Answer : A

'Retention' - from the word 'retain', meaning to 'keep in place', 'hold back', 'keep possession of' something (Concise Oxford Dictionary, fifth edition) . In this case, 5% of the contract price.

Question 5

In terms of interest rates, the 'base rate' is:

AThe interest rate set by government or the central bank of a country

BThe interest rate stated within a contract of supply for late payments

CThe interest rate payable on a loan for the procurement of a new instrument

DThe interest rate used to calculate repayments on a credit card

Answer : A

The base rate is often used as a basis for the calculation of other rates, some of which eg credit card repayment rates, bear no resemblance to the base rate. Some longer-term, perhaps more responsible, lending, uses changes in the base rate to determine a repayment rate for debt eg mortgage rates. For credit card repayment rates and for late payments in business contracts there is often a considerable amount of freedom to agree relevant rates, but government is often encouraged to influence to try to ensure some level of sanity.

The answer which references procurement of a new 'instrument' is an attempt at humour, 'base' be-ing a type of guitar.

Question 6

Under a contract with a price adjustment clause, which of the following would commonly be grounds for price adjustment (depending on the precise contract terms)?

AQuality problems brought about by supplier's haste to complete the contract to aid their cashflow

BSubstantially escalating materials costs

CExchange rate fluctuations

DDesire by shareholders to have increased profits

Answer : B, C

Exchange rate fluctuations and escalating materials costs can both substantially impact on a contract price. Where a contract has been drafted to allow for it, the price may be adjusted in line with some pre-agreed mechanism or formula to make the price paid more equitable.

Quality problems of the supplier's own making and shareholders seeking extra profit - neither being uncommon - are not seen as being grounds for adjusting price (upwards).

I should mention that price adjustment clauses can result in prices being adjusted either upwards or downwards, or not at all, depending on circumstances.

Question 7

In one format for describing socio-economic groupings, skilled, semi-skilled and unskilled working class people would be classified as:

AA,

BC1

CC2,

Answer : B

This is a broad group of people deriving income from employment, including some skilled people through to unskilled.

A, B and C1 would be those people often referred to as upper middle class or upper class; whereas E would describe a broad group of the poor, the unemployed, etc.

These are rough generalisations regarding people's likelihood of income, taste, lifestyle, etc. To take an extreme example, there is probably not much point in trying to market Dom Perignon (an expen-sive brand of champagne) to the E group. But the E group might welcome promotion of a low-cost brand of tobacco or cigarettes.

CIPS Procurement and Supply Environments L3M1 Exam Practice Test