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CIPS Exam L4M3 Topic 1 Question 59 Discussion
Topic #: 1
Under a price adjustment agreement, which of the following would be supplier's justification for increasing unit price?
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
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