CIPS L4M3 Exam - Topic 1 Question 59 Discussion

Actual exam question for CIPS's L4M3 exam

Question #: 59
Topic #: 1

[All L4M3 Questions]

Under a price adjustment agreement, which of the following would be supplier's justification for increasing unit price?

ARise in fuel price

BRise in economies of scale

CRise in shares price

DRise in customer's satisfaction

Show Suggested Answer

Suggested Answer: A

Normally in a price adjustment agreement, the supplier is allowed to change price based on an indexation, which is published by a third party (for example, government or exchange market). The selected indices often associate with input materials of supplier. For instance, the plastics manufacturer may adjust their price based on crude oil price as oil is major input of producing plastics. Other suppliers may select different set of indices, such as Producer Perception Index.

In this question, only 'Rise in fuel price' could be a justification for supplier to increase price because:

- It may affect the input material price

- The index is checked and published by an independent third party.

LO 3, AC 3.3

by Frankie at Jun 14, 2025, 09:06 AM

Limited Time Offer

25%

Off

Get Premium L4M3 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Miles

2 months ago

C is just irrelevant here, right?

upvoted 0 times

...

Fredric

2 months ago

I don't think B makes sense for price hikes.

upvoted 0 times

...

Lacresha

3 months ago

Wait, can they really raise prices just because of customer satisfaction?

upvoted 0 times

...

Tashia

3 months ago

A makes total sense, but D is surprising!

upvoted 0 times

...

Huey

3 months ago

Definitely A, fuel prices are skyrocketing!

upvoted 0 times

...

Stefanie

3 months ago

I feel like customer satisfaction might not be a strong reason for a price increase. It seems more related to costs like fuel.

upvoted 0 times

...

Rolland

4 months ago

I’m not really clear on this one. I thought economies of scale could justify lower prices, not higher ones.

upvoted 0 times

...

Horace

4 months ago

I remember a practice question about cost increases, and fuel prices were mentioned as a common justification. So, I’m leaning towards A as well.

upvoted 0 times

...

Genevieve

4 months ago

I think option A makes the most sense since fuel prices directly affect transportation costs, but I'm not entirely sure.

upvoted 0 times

...

Charlena

4 months ago

I'm a bit confused on this one. I'll need to review the key terms of a price adjustment agreement to make sure I fully grasp the criteria for when a supplier can increase the unit price. Gotta be careful on these tricky exam questions.

upvoted 0 times

...

Roy

4 months ago

Okay, let's see. The rise in fuel price makes sense as a valid justification, since that's a key cost factor for the supplier. I don't think the other options like economies of scale or share price would be relevant here.

upvoted 0 times

...

Victor

5 months ago

Hmm, I'm not sure about this one. I'll need to think through the different options carefully to make sure I understand the key factors that would allow a supplier to increase the unit price.

upvoted 0 times

...

Mabel

5 months ago

This seems straightforward - the rise in fuel price would be the supplier's justification for increasing the unit price under a price adjustment agreement.

upvoted 0 times

...

Geraldo

8 months ago

I'm going with A. Fuel prices are a major factor in supplier costs, so that's the most logical choice here. Unless there's a hidden joke I'm missing?

upvoted 0 times

...

Karan

8 months ago

I'm not sure about that. I think a rise in economies of scale could also be a valid justification for increasing unit price.

upvoted 0 times

...

Josephine

8 months ago

C) Rise in shares price? That's just ridiculous. The supplier's costs, not their stock performance, should be the basis for price adjustments.

upvoted 0 times

Lanie

7 months ago

D) Rise in customer's satisfaction

upvoted 0 times

...

Mariko

7 months ago

C) Rise in shares price? That's just ridiculous. The supplier's costs, not their stock performance, should be the basis for price adjustments.

upvoted 0 times

...

Maile

7 months ago

B) Rise in economies of scale

upvoted 0 times

...

Leota

7 months ago

A) Rise in fuel price

upvoted 0 times

...

Tamekia

8 months ago

B) Rise in economies of scale could be a reasonable justification, but I'm not sure if it would be covered under a typical price adjustment agreement. Hmm, tough one.

upvoted 0 times

Dannie

7 months ago

C) Rise in shares price

upvoted 0 times

...

Wilbert

8 months ago

B) Rise in economies of scale

upvoted 0 times

...

Emiko

8 months ago

A) Rise in fuel price

upvoted 0 times

...

Louvenia

8 months ago

I agree with Gerardo. A rise in fuel price would definitely impact the supplier's costs.

upvoted 0 times

...

Teri

8 months ago

D) Rise in customer's satisfaction? Really? That doesn't seem like a valid justification for a price increase. What are they thinking?

upvoted 0 times

...

Truman

8 months ago

I think the correct answer is A) Rise in fuel price. It's a valid reason for a supplier to increase the unit price under a price adjustment agreement.

upvoted 0 times