CIPS L4M2 Exam - Topic 3 Question 67 Discussion

Actual exam question for CIPS's L4M2 exam

Question #: 67
Topic #: 3

A buyer can use sources of information to review indirect costs associated with the manufacture of goods to support supplier negotiations. Is this statement true?

ANo, because the supplier's quotation is the only source of information

BYes, because the buyer can understand the cost build-up of the goods

CNo, because the only information available is for direct costs

DYes, because indirect costs are always variable

Show Suggested Answer

Suggested Answer: B

Comprehensive and Detailed Explanation (from CIPS L4M2 -- Cost Management and Analysis)

CIPS teaches that indirect costs (e.g. overheads, admin, factory costs) can be estimated by using:

Supplier financial statements,

Benchmarking,

Industry cost models.

Analysing these supports negotiations by revealing true cost drivers.

Therefore, Option B is correct --- buyers can and should assess indirect costs when evaluating total cost and negotiating.

Relevant L4M2 references:

''Understanding direct and indirect cost elements''

''Cost analysis and should-cost models in business case preparation''

by Hannah at Jan 05, 2026, 05:16 AM

Limited Time Offer

25%

Off

Get Premium L4M2 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Rosalyn

15 days ago

I agree with Melissa. Indirect costs can influence pricing.

upvoted 0 times

...

Laura

20 days ago

No way! Only direct costs matter in quotes.

upvoted 0 times

...

Sanda

26 days ago

Definitely yes! Knowing the cost build-up is crucial.

upvoted 0 times

...

Melissa

1 month ago

I think it's true. Understanding costs helps in negotiations.

upvoted 0 times

...

Lavonna

1 month ago

No way, direct costs are the main focus, right?

upvoted 0 times

...

Daron

1 month ago

Supplier quotes aren't the only info; market research helps too.

upvoted 0 times

...

Dalene

2 months ago

Wait, are indirect costs always variable? That seems off.

upvoted 0 times

...

Lindsay

2 months ago

I agree, knowing indirect costs helps in negotiations.

upvoted 0 times

...

Daniel

2 months ago

Definitely true! Understanding costs is key.

upvoted 0 times

...

Theola

2 months ago

Gotta love those indirect costs - the hidden gems of the manufacturing world!

upvoted 0 times

...

Merilyn

2 months ago

Indirect costs? More like "in-direct" costs, am I right? *wink wink*

upvoted 0 times

...

Joni

2 months ago

A) is just plain wrong. Buyers have access to various sources beyond the supplier's quotation.

upvoted 0 times

...

Luther

3 months ago

D) is a bit of a stretch. Indirect costs can be both fixed and variable.

upvoted 0 times

...

Brandon

3 months ago

C) is wrong. Indirect costs are an important part of the overall cost structure.

upvoted 0 times

...

Katie

3 months ago

B) is the correct answer. Understanding the cost build-up is crucial for effective supplier negotiations.

upvoted 0 times

...

Kenny

4 months ago

D seems wrong to me because not all indirect costs are variable; I think that could be a trap in the question.

upvoted 0 times

...

Penney

4 months ago

I feel like A could be misleading; I mean, we definitely have other sources besides just the supplier's quote, right?

upvoted 0 times

...

Eugene

4 months ago

I'm not too sure, but I remember a practice question that mentioned indirect costs can influence pricing.

upvoted 0 times

...

Juan

4 months ago

I think the answer might be B, since understanding the cost build-up is crucial for negotiations.

upvoted 0 times

...

Catalina

4 months ago

This is a tricky one. I'm going to read through the question and answers again carefully before making a decision. I want to make sure I understand the concepts involved.

upvoted 0 times

...

Pauline

4 months ago

Okay, I've got a strategy here. I'll eliminate the options that don't seem right, then choose between the remaining ones. A and C don't sound correct, so I'm leaning towards B or D.

upvoted 0 times

...

Tammara

5 months ago

Hmm, I'm not too confident about this one. I'll need to think through the differences between direct and indirect costs to decide which answer makes the most sense.

upvoted 0 times

...

Natalie

5 months ago

I'm a bit confused here. Are indirect costs the same as variable costs? I'm not sure if option D is correct or not.

upvoted 0 times

...

Alona

5 months ago

This seems like a straightforward question about indirect costs. I think I'll go with option B - the buyer can use information to understand the cost build-up.

upvoted 0 times

...