Free CIPS L3M1 Practice Exam with Questions & Answers

Explanation

A market with only one buyer is called a 'monopsony'.

There may be other QUESTION NO:s in this test about the other terms shown, so I shall hold back on expla-nation(s) here.

Explanation

To the lay person, they may look the same.

However, for a procurement professional, a fixed price may be altered in some circumstances eg 'fixed price with incentive', 'fixed price with exchange rate adjustment', etc.

A firm price on the other hand cannot be altered, and is the price which will be paid under the con-tract.

An earlier text by Patrick Behan on government contracting refers.

Explanation

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.

Explanation

The definition shown refers to the word 'price'. The price is what someone will pay for something - the extent to which a customer values something - and the reference to the standard monetary unit refers to, for example, a dollar, a Euro, a dinar or whatever.

The other answers are, to some extent, intended to confuse, as they use some of the words shown in the definition. Care must be taken not to jump to a conclusion here.

The response 'cost' should give pause for thought, as, in a sense, the cost of doing or making some-thing may have value. But value is determined by the customer - this definition is a reference to the value the customer would pay - the price.

Explanation

This should be an easy QUESTION NO:. The definition describes nicely one possible form of cost-based price. It is important to try to be able to distinguish cost from price.

The 'target cost incentive' method of pricing might have been tempting as an answer, since the defi-nition shown mentions cost, but it mentions neither target nor incentive, and can therefore be ruled out.

And whole life cost is a different concept altogether.

Explanation

Specification is the answer. The second sentence in the rubric makes it clear that this is the correct answer.

Explanation

Government decisions and actions regarding the level of interest rates and supply of money in the economy.

Fiscal policy relates to taxation and its relationship to government expenditure.

The other two suggested answers: exchange rates and unemployment rates are a factor of other poli-cies; the size of coins and banknotes is beyond the scope of your syllabus and my knowledge. :)

Explanation

The base rate is often used as a basis for the calculation of other rates, some of which eg credit card repayment rates, bear no resemblance to the base rate. Some longer-term, perhaps more responsible, lending, uses changes in the base rate to determine a repayment rate for debt egmortgage rates. For credit card repayment rates and for late payments in business contracts there is often a considerable amount of freedom to agree relevant rates, but government is often encouraged to influence to try to ensure some level of sanity.

The answer which references procurement of a new 'instrument' is an attempt at humour, 'base' be-ing a type of guitar.

Explanation

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.

Explanation

Corporate Governance. Not to be confused with CSR.

Corporate identity relates to marketing and branding; corporate manslaughter is the concept of an organisation being criminally accountable for the deaths of humans through some lack of care. An example might be the deaths of rail company employees on the railway track, where the prosecution would attempt to show that it was the employers' fault.