L3M3 Sample Questions Answers

Explanation

'Is it acceptable, feasible and suitable?' are the tests.

Explanation

The answer is fixed costs. Their counterpart are variable costs, which do vary as business activity increases or decreases.

Direct and indirect costs are a different method of categorizing costs within an organisation.

Explanation

Cost of production, and shareholder and managerial expectations of profit, are both internal factors in decision-making. Although shareholders may be outside the firm, management will condition shareholders' expectations. Customer perception of value and the extent of marketplace competition are significantly outwith the control of the company.

Explanation

Distributive: at the other end of the spectrum from 'collaborative'.

Explanation

An opportunity cost is the cost of not being able to do something else.

For example, if a firm opts to build a new factory, it may not be able to create ten new retail outlets which was another option open to it, in spending these particular funds. Or if you buy a holiday, you may not be able to buy a new television. The television is the opportunity cost of the holiday ie the benefit foregone.

The other types of cost shown are methods of classifying actual (real) costs. Opportunity costs are, in a sense, not real; they are hypothesized and therefore do not show in the balance sheet or profit and loss account of a business.

Explanation

'Market skimming' is the correct answer.

An obvious example of this type of pricing behaviour is in the field of technology, where 'early adopters' will pay significantly more for a product, even although they know the price will drop subsequently. For commercially-used products, sometimes there is an urgent need for an organisa-tion to acquire - a topical example as I write (early 2022) is some new surveillance technology which is in the news and which some governments are desperate to have. In consumer markets, everyone's 'go-to' example is the next generation smartphone, especially Apple products.

Promotional pricing is a short-term price reduction (or 'two-4-one' type offer) to generate sales in the short-term, for example to clear stock, or because of a manufacturer financial support arrangement.

Price discrimination is where the seller sets different prices for different market segments. An ex-ample would be charging different rail fares in UK or mainland Europe based on customer age.

Contribution pricing is based on the notion that sales should cover costs, contributing to the busi-ness, without necessarily making a profit. For example, a large order may be accepted which will keep the workforce employed (retaining their skills as well as having a considerate / ethical outlook) to see the firm through a rough period.

Explanation

Socio-cultural. The only 'S' in the framework.

Explanation

When price is discussed as a % of costs to be added on, the term is 'mark-up'.

Explanation

Outputs link to the concept of a performance (or 'output') specification, not a conformance specifi-cation.

Explanation

These are 'model form' contracts. Industry standard templates eg NEC ('New Engineering Con-tract'); or FIDIC model form contracts. You will find some examples produced by CIPS on the CIPS website eg for IT procurements.

Explanation

An agreement between two or more parties which is enforceable in law.

This definition separates a contract from a social or domestic arrangement, in that contracts are in-tended to be enforceable at law. The other answers shown here dilute the concept, and so are unac-ceptableas answers to the question.

Explanation

Consideration is one of the essential elements of a contract in English law, and it essentially means the exchange of something of value for something else of value, typically goods or services for money.

Normally it is the price to be paid in exchange for goods or services.

Explanation

Trading blocs eg EU, EFTA, ASEAN aim to free up trade within the bloc; the other answers of-fered will negatively affect free trade.

Explanation

Post-tender negotiation.

In my opinion, potentially a very rewarding activity where the rules permit.

Explanation

Non-disclosure agreement, also known as a confidentiality agreement.

Explanation

Economic.

I think foreign exchange at least couldn't fit into any other STEEPLE factor, so that's a clincher and it has to be 'economic'.

Explanation

Milestone plan.

This is difficult, and if you opted for 'staged', that is understandable. 'Milestone' or 'gateway' are terms often used to describe a situation in which a particular point must be reached on a project, pri-or to release of funds. By this means, a close linkage can be made between outputs achieved and payments made. The idea of stages goes towards this, and 'progress payments' ie payment based on alleged progress or simply time, have been shown in many cases, to be ineffective in achieving value for money.

Explanation

English law, with Scots and European law being different.

In many Commonwealth countries, the legal system used is based on historic English law, thus many lawyers around the world are familiar with many of the fundamental concepts of English law, including the law of contract.

Contracts should state which legal system applies.

Explanation

The seller tries to penetrate the market, to build market share, depriving competitors of those sales, and hoping to retain the customers for future sales. This is penetration pricing.

'Cost mark-up' would be based on cost - add a certain amount to create the selling price. For exam-ple, in UK clothing retail often simply 100% added to the cost of the goods - simple, fast and hope-fully sufficient to coverall costs, as well to enable the goods to sell. This approach hinges on effec-tive buying, at the right cost.

Promotional pricing is a temporary price drop to encourage purchases of a particular product or range.

Competitive pricing would simply mean pricing at around the market level - monitoring market and competitor prices.

Explanation

Risk register.

A risk manual is more likely to explain risk(s), and say what should be done regarding risks.

Explanation

Since performance specifications are all to do with outputs, 'input-driven' leaps out as being the cor-rect answer here.

Explanation

In English law, implied terms exist, even if you can't see them in the contract documents. They commonly derive from statute. An example is the Sale of Goods Act.

Explanation

EFTA.

The European Free Trade Agreement countries.

Explanation

Specification creep - where the requirement becomes more complex or sophisticated than originally thought necessary for the buying organisation's purposes. Naturally, this can be expected to increase cost to the buying organisation.