CIPS Procurement and Supply Environments L3M1 Exam Questions

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Total 90 questions
Question 1

Which of the following is likely to reduce 'capital growth'? Select all that apply.



Answer : B, C

Payment of high salaries and large allowances, may, fairly obviously reduce the amount of profit which can be retained for capital growth. If money is being distributed in this way, it isn't being re-tained.

A profitable company has a choice: to pay dividends to a greater or lesser extent; or retain some of its profits to a greater or lesser extent in the form of retained capital - capital growth.

Increased sales and increased profit may result in increased capital growth, all other things being equal, depending on the firm's dividend policy.


Question 2

A 'genuine pre-estimate of loss' describes:



Answer : C, C

This a definition of liquidated damages. Calculated in advance of the event occurring ie pre-contract and thus agreed by the parties in advance. Meaningful advance calculations (estimates) must be available to enforce legally.

The term and the spirit of 'penalty clause' is discouraged in English law - damages should be aimed at returning the damaged party back into the position they would have been in, had a wrong not been done.

Unliquidated damages can only be awarded by a court after the event, and should not be relied up-on.

An example of a quantum meruit award can be found in the British Steel v Cleveland Bridge (1984) case - a rare occurrence, and again something which must not be relied upon.


Question 3

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



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.


Question 4

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?



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 5

The y-axis of the Product Life Cycle could properly show the following (select all that apply):



Answer : A, B, C

The vertical axis (the y-axis) of the product life cycle diagram could correctly show all three, and might commonly show losses and / or investment in the early stage(s).


Question 6

Which one of the following is a commercial document issued by a buyer describing requirements for products or services to be provided by a seller?



Answer : B

The only one of these four which fits the bill is 'purchase order'.

The supplier quotation and the invoice both come from the supply side.

The requisition is an internal document.


Question 7

Because of the need for frequent or semi-frequent uses of competition, public sector buyers are less likely to find themselves in a close partnership arrangement with a supplier than private sector buy-ers. True or false?



Answer : B

This is true.


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Total 90 questions