QUESTION: 69

Which kind of these following costs belong to fixed costs? Select 2 that apply.

Energy consumption in manufacturing
The annual income tax charged by local authorities
The packaging and distribution costs
The depreciation of capital inputs
The costs of leasing or purchasing capital equipment

Answer(s): D,E

Explanation:

Based on variability, the costs has been classified into three categories, they are fixed, variable and semi variable. Fixed costs, as its name suggests, is fixed in total i.e. irrespective of the number of output produced. Variable costs vary with the number of output produced. Semi-variable is the type of costs, which have the characteristics of both fixed costs and variable costs (Source: Key Differences).
Among above costs, leasing and depreciation are relatively static and do not change if volume of business activities increase or reduce.
Packaging, utilities and annual business rate (tax) are variable costs.

Reference:

CIPS study guide page 26
LO 1, AC 1.2

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QUESTION: 70

When procuring a machinery, at which stage buyer must check whether it is working to the stand- ards set out in the design specification?

Installation
Maintenance and repair activities
Customer support
Manufacture

Answer(s): A

Explanation:

Through-life Management involves the life-cycle management of the products, services and activities required to deliver a fully integrated capability to the customer, while reducing the cost of ownership for the customer.

Source: Andrew Graves
The installation stage occurs in In-Service Operations. At this stage, the machinery is shipped and installed on the buyer's premises and check to ensure that it is working to the standards set out in the design specification.

Reference:

CIPS study guide page 130

LO 3, AC 3.2

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QUESTION: 71

Halfords is a major bicycle and car parts retailer with long history in the market. Its suppliers are plentiful and there is no threat of forward integration. Some other smaller retailers are applying 3D- printing technology to make personalized bicycle parts but their market share is relatively low. 3D- printing technology is an example of which competitive force?

Bargaining power of buyer
Threat of substitute
Rivalry within the industry
New entrants may enter the market

Answer(s): B

Explanation:

3D-printed parts can replace traditional metal parts. They are also more easily customised to fit customer's needs. This technology is an example of threat of substitute in Porter's Five Forces model. Substitute goods or services that can be used in place of a company's products or services pose a threat. Companies that produce goods or services for which there are no close substitutes will have more power to increase prices and lock in favorable terms.
When close substitutes are available, customers will have the option to forgo buying a company's product, and a company's power can be weakened.

Reference:

- CIPS study guide page 85-96
- Porter's 5 Forces Definition: Analyzing Businesses (investopedia.com) LO 2, AC 2.2

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QUESTION: 72

Ymira is asked to develop the specification for water purifier which will be used at the company headquarter. She believes that the specification can be drafted based on the information available on the Internet, such as blog posts, comparison websites, how-to websites, life hacks, etc.
Which of the following traits will make the information more useful?

Trustworthy sources
Objectivity
Subjectivity
Written by inexperienced author
Promotional information

Answer(s): A,B

Explanation:

Internet is a great source of information, however, information from the Internet needs to be tested for accuracy and reliability. To check the information from the Internet, a buyer can use the criteria with acronym SAMOA:

Source (of the information)
Audience (intended as the recipient of the information) Methodology (used to collect and analyse the data)
Objectivity (of the information - there should be no bias) Accuracy

Reference:

CIPS study guide page 125-126
LO 3, AC 3.1

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