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Free CIPS L6M5 Exam Braindumps (page: 4)

Page 4 of 22
PDF with 83 Questions

Joanne is preparing a contract for the construction of a large shopping center. The project includes 52 retail units, several restaurants, and a parking facility. Joanne's company has contracted Construct Ltd under a Turnkey project. She is using a Gantt chart as a schedule in the contract.
Q: What type of payment mechanism is being used in this contract? Answer Options:

  1. Fixed Lump Sum
  2. Bill of Quantity
  3. Activity Schedule
  4. Cost Reimbursable

Answer(s): C

Explanation:

The correct answer is Activity Schedule (p.60). A Gantt chart is a time-based project planning tool, typically used in Activity Schedule contracts, where payments are tied to the completion of specific tasks. Other payment methods, such as Fixed Lump Sum and Bill of Quantity, do not rely on this approach. [P.60]



In which scenario would a Cost Reimbursable contract be most suitable? Answer Options:

  1. A research project where the exact scope of work is unknown at the onset
  2. A construction project where raw material prices may fluctuate
  3. The creation of a new product, where time is critical, and the client wishes to reward the contractor for speedy delivery
  4. The manufacturing of food items, where the client may return raw materials that do not meet specifications

Answer(s): A

Explanation:

Cost Reimbursable contracts are widely used in research projects where the exact scope is uncertain (p.69). These contracts allow for flexibility in cost adjustments based on project progress. Option B describes a contract using cost-plus pricing, and Options C and D do not fit this contract model. [P.69]



At what stage in a program's lifecycle is an Investment Appraisal conducted?

Answer Options:

  1. Before contracting ­ to ensure the program is viable
  2. At the initiation stage ­ to decide which contractor to hire
  3. During the project ­ to ensure that money is being well spent and the program will be delivered to schedule
  4. After completion ­ to assess whether money was invested wisely

Answer(s): A

Explanation:

Investment Appraisal is performed before a program is approved (p.69). It evaluates whether the project is financially viable and likely to provide a return on investment. Option B relates to procurement, and Options C and D are post-implementation assessments. [P.69]



Fred is comparing two possible projects that will last for different durations. His company can only select one project due to financial constraints. He needs a method to compare the financial benefits of both projects.
Q: Is a payback analysis a useful tool for Fred to use? Answer Options:

  1. Yes ­ this will account for the difference in duration of the two projects
  2. No ­ this will not account for the difference in duration of the two projects
  3. Yes ­ this will provide Fred with a rate of return that is useful to accurately forecast profits
  4. No ­ there is no formula to calculate this, and a discount factor must be used

Answer(s): A

Explanation:

A Payback Analysis (p.72) calculates how long it takes for a project to recover its initial investment. It accounts for project duration but does not provide a rate of return (Option C). Discount factors (Option D) are used in Net Present Value (NPV) analysis, not Payback Analysis. [P.72]






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