CIPS Exam L4M2 Topic 5 Question 46 Discussion

Actual exam question for CIPS's L4M2 exam

Question #: 46
Topic #: 5

[All L4M2 Questions]

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?

AYes, because indirect costs are always variable

BNo, because the only information available is for direct costs

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

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

Show Suggested Answer

Suggested Answer: C

In this scenario, the final product has vast range of parts. The second problem is lacking any part can cause disruption to the production process. So GE has 2 things to do: to reduce the part varie-ties, and secure the supply. Part standardisation is the best option here. It can simplify the range of parts or materials used, and simultaneously, it expands the supply base of GE. If a supplier fails to deliver the part, the company always has other options to replace.

Costs are also a concern, but bottleneck in production imposes a serious risk to the organisation. Driving down costs using market competition cannot be a foremost priority.

Increasing production may help to reduce bottleneck. However, it will also increase the inventory of finished products and unnecessary upkeep costs.

LO 3, AC 3.4

by Aliza at Sep 12, 2024, 09:51 PM

Limited Time Offer

25%

13 days ago

I think the statement is true because indirect costs can impact the overall cost of goods.

upvoted 0 times

...