CIPS Level 4 Diploma in Procurement and Supply L4M5 Updated Exam

There are 3 major costing methods:

Marginal costing

• Uses marginal cost of producing addition units

• Uses variable cost to derived a unit cost (does not include fixed cost)

• Fixed cost treated as a ‘period cost’ and deducted, as a total amount, from total contribution to profit for the period, in the firm’s profit and loss account

Absorption costing

• Calculates total cost of producing product

• In addition to variable cost, a fair proportion of fixed cost is allocated to (absorbed) each unit of output, as a fixed cost per unit

Activity based costing

• Similar to absorption costing but with fixed cost allocated to products on the basis of the cost of activities used in producing them

LO 2, AC 2.1

Closed questions (requiring yes/no or factual answers) are best for verifying facts, ensuring clarity and accuracy. Open questions are useful for exploration, while hypothetical test possibilities, and leading steer responses. In negotiation, closed questions confirm details such as prices, quantities, or deadlines, preventing ambiguity in agreements. CIPS stresses using the full range of question types strategically, with closed questions essential in finalising commitments.

There are many factors that can influence the balance of power in a negotiation. These factors are classified into 3 levels:

- Macro level: STEEPLE framework: social, technological, economic, environment, political, legal and ethical

- Micro level: Porter's five forces:

Diagram Description automatically generated

- One-to-one buyer-supplier dynamics.

The question asks about the micro factors that increases buyer's bargaining power. Among 5 answers, only 2 are likely to increase buyer's power:

- JCB's switching costs are low: Buyer may easily switch its suppliers anytime

- These components are highly standardised: The products are not different any more, buyer may choose to buy from any supplier available.

Other answers cannot be correct because:

- Suppliers are more concentrated than buyer: Suppliers are forming oligopoly market, their bargaining power tend to be greater.

- Eruption of epidemic in supply market: this is a macro factor. Eruption of epidemic may cause factories closed and disruptions on supply chain.

- Buyers purchase in small volumes: Buyer will be seen as less potential to suppliers. Buying organisation may have difficulties to deal better price with suppliers.

LO 1, AC 1.3

Competitive bidding is generally recommended for high-value or complex purchases where the cost and time required for the bidding process are justified. For low-value, routine items like pens, the time and resources required for competitive bidding may outweigh the potential cost savings, as noted in CIPS best practices. Hence, Option C is the best answer.