L4M5

Review 60 L4M5 practice questions with answer explanations and community insights.

Question 1

Commercial negotiations on prices cover a range of aspects including pricing arrangements. A buyer may negotiate for a ‘fixed price agreement’.Why is a fixed price agreement advantageous to the buyer?

  1. The buyer will benefit from the savings that the supplier makes from the efficient cost management of the contract
  2. The buyer will not need to monitor the supplier’s costs relating to the contract
  3. Suppliers always seek price agreements that include cost sharing incentives
  4. Suppliers calculate prices using fixed costs which the buyer must counteract by pushing for a fixed price agreement

Question 2

When considering a new supply source for a product, a procurement professional will review the suppliers’ quotations before a supplier negotiation.Which of the following is a direct cost associated with the product within a potential supplier’s quotation?

  1. Rent for the supplier’s premises
  2. Insurance for production machinery
  3. Metal used in the product
  4. Wages for the supplier’s sales department

Question 3

Which of the following is a challenge when calculating absorption costing?

  1. Attributing a fair amount of overhead to each unit of production
  2. Attributing fair cost drivers and cost pools to each unit of production
  3. Understanding the profit element as a percentage of cost
  4. Understanding the profit element as a percentage of selling price

Question 4

John is discussing undertaking a post-negotiation review with Simone and states that ‘a meeting with all stakeholders must be undertaken as it is the most effective way of getting feedback’.Is this statement correct?

  1. Yes, as it allows all stakeholders to be present physically
  2. Yes, it allows stakeholders to blame procurement for any failings
  3. No, there may be a more effective way to undertake the review
  4. No, John may only record what he believes is correct

Question 5

During a negotiation, Jose Gomez, the salesperson for a strategic supplier, states that his sales director will not approve discounts against initial purchases. However, Jose offers a 5% discount against the aftercare package, which will provide the same monetary saving. Sally Pampas requires both the product and the aftercare package and has an objective to achieve a 5% discount off the purchase price.To achieve a win-win (integrative) negotiation, Sally should __________.

  1. decline the offer and walk away from the negotiation
  2. accept the offer of a 5% discount against the aftercare package
  3. ask Jose to apply a 15% discount against the purchase price
  4. ask Jose to apply the 5% discount against the purchase price