QUESTION: 5

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?

Bundle these instruments into larger contract
Leverage market competition to drive down cost
Seek continuity of supply
Form partnership with supplier

Answer(s): D

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:

Reference:

CIPS Study guide page 84.
LO 2, AC 2.1

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QUESTION: 6

Thani Ltd is a fast growing logistics company with a fleet of 20 tractors. To meet Net Zero objec-tive, the company needs to electrify its fleet. Angelica is assigned to investigate the market price of electrifying services. After the investigation, she realises that the current market price is very expensive and unsustainable for her company. She decides to break down the costs before negotiating with the suppliers.
Which internal stakeholders may help Angelica estimate the breakdown of costs? Select 2 that apply.

Sales and Marketing department
Engineering department
Finance department
Commercial agency
Suppliers

Answer(s): B,C

Explanation:

Despite of its importance, cost analysis is often a daunting task for procurement professionals. In order to analyse supplier's costs effectively, procurement may need the input from other depart- ments. Normally, technical (or engineering) department may help them to identify the direct costs of the product/service (how much material is required to make the product, or how many people are needed to perform the job, etc), while finance (or accounting) department may have ideas on the overheads of the supplier.
In this scenario, engineering department may provide insights on the components needed and the tasks to perform. Similarly, finance may know how much supplier pays for the overheads. On the other hand, while commercial agency and suppliers are external stakeholders, Sales and marketing is unlikely to provide valuable information in this case.

Reference:

CIPS study guide page 102
LO 2, AC 2.3

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QUESTION: 7

Which of the following are the causes of material cost variance?
1. The buyer updates purchase-to-pay system to track payment and delivery
2. An unprocessed goods received note is missing
3. The employees must work overtime to catch up with the customers' orders
4. The purchase is made in emergency

2 and 4 only
1 and 4 only
1 and 3 only
2 and 3 only

Answer(s): A

Explanation:

The difference between the standard cost of direct materials specified for production and the actual cost of direct materials used in production is known as Direct Material Cost Variance. Material Cost Variance gives an idea of how much more or less cost has been incurred when compared with the standard cost. Thus, Variance Analysis is an important tool to keep a tab on the deviations from the standard set by a company.
Material Cost Variance can be due to less purchase price being paid than the standard or because of change in the quantity of material used. Thus, Material Cost Variance is made up of two components namely; Material Price Variance and Material Usage Variance.

Among the 4 options:
- 'The buyer updates purchase-to-pay system to track payment and delivery': The use of e- procurement system can increase the productivity and create labour cost variance, not material cost variance.
- 'An unprocessed goods received note is missing': If a goods received note is missing, the buyer won't pay for that batch, which create quantity variance.
- 'The employees must work overtime to catch up with the customers' orders': Overtime salary can cause labour variance, not material cost variance.
- 'The purchase is made in emergency': Normally, the price in emergency situation is higher than usual. This can cause price variance.

Reference:

- CIPS study guide page 57-59

- Material Variance | Cost, Price, Usage Variance Formula, Example - eFM (efinancemanage- ment.com)
LO 1, AC 1.4

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QUESTION: 8

What does the acronym RAQSCI stand for?

Relationship, Ability, Quality, Service, Cost, Innovation
Regulatory, Availability, Quality, Service, Cost, Innovation
Regulatory, Availability, Quantity, Sustainability, Inventory
Regulatory, Ability, Quality, Service, Cost, Inventory
Relationship, Availability, Quantity, Sustainability, Cost, Innovation

Answer(s): B

Explanation:

RAQSCI stands for Regulatory, Availability, Quality, Service, Cost, Innovation.
LO 1, AC 1.1

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Free L4M2 Exam Braindumps (page: 2)

QUESTION: 5

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QUESTION: 6

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QUESTION: 7

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QUESTION: 8

Explanation: