CIPS L4M5 Exam - Topic 14 Question 37 Discussion

Actual exam question for CIPS's L4M5 exam

Question #: 37
Topic #: 14

[All L4M5 Questions]

Which of the following is the definition of safety margin?

AThe difference between current or forecasted sales and sales at the break-even point

BThe amount of revenue that remains after subtracting costs directly associated with production

CThe production level at which total revenues for a product equal total expenses

DThe incremental money generated for each product/unit sold after deducting the variable costs

Show Suggested Answer

Suggested Answer: C, E

Becoming a preferred customer to supplier's perspective can increase the purchaser's leverage in negotiation. Beside the size of buying organisation or its spend, the following may be sufficient to differentiate the buyer from other buying organisations:

- Simple procurement processes

- Simple contracting processes

- Clear and concise documentation

- Absence of onerous supplier terms and conditions (onerous supplier terms and conditions mean that obligations imposed on suppliers are greater than their gains)

- On-time payment: The reduction in hassle for both supplier and the buyer, if bills are paid on time, is significant. From the customer's perspective it could also be the opener to agreeing preferential payment terms. A supplier may weigh up that payment on time at 60 days is worth taking, over the current 30-day terms that slip to 90 days and beyond.

- Transparent processes

- Ethical behavior

LO 1, AC 1.3

by Jamal at Feb 04, 2023, 06:03 AM

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Mollie

7 months ago

So, it's like a buffer for unexpected drops in sales?

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Chauncey

7 months ago

I thought it was about revenue after costs, not just sales!

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Golda

7 months ago

Wait, is that really the definition? Sounds off.

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Vivienne

7 months ago

Totally agree, it's all about that cushion!

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Ahmad

7 months ago

Safety margin is the difference between sales and break-even point.

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Maira

8 months ago

I feel like I’ve seen this concept before, and it seems like option A makes the most sense to me, but I’m still a bit uncertain.

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Harris

8 months ago

I keep mixing up the definitions; I thought safety margin was about revenue after costs, but that might be something else.

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Arlean

8 months ago

I remember practicing a question similar to this, and I think the safety margin is definitely about the difference between sales and break-even, so I’d go with option A.

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Kallie

8 months ago

I think the safety margin is related to sales and break-even points, but I'm not entirely sure if it's just about current sales or forecasted ones too.

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Aaron

8 months ago

Hmm, I'm a bit unsure about this one. I know the different backup types, but I'm not sure which one would be the best fit for this scenario.

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Lamonica

8 months ago

I'm a little confused by the wording of this question. Does "configurable in the Product Master" mean something specific? I'll need to review my notes to make sure I understand the correct configuration options.

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Shawna

8 months ago

Hmm, I'm a little unsure about this one. I think the answer might be B, a promise of extended benefits if the company remains union free. But I'm not totally sure, I'll have to think it through a bit more.

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Karma

8 months ago

Hmm, this one's a bit tricky. I'll need to think it through carefully.

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Pamela

1 year ago

Safety margin? I thought that was the name of a cool new safety app. Guess I should've read the question more carefully.

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Gladys

12 months ago

D) The incremental money generated for each product/unit sold after deducting the variable costs

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Altha

12 months ago

C) The production level at which total revenues for a product equal total expenses

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Levi

12 months ago

B) The amount of revenue that remains after subtracting costs directly associated with production

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Brandon

12 months ago

A) The difference between current or forecasted sales and sales at the break-even point

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Kandis

1 year ago

Break-even point? Safety margin? What is this, a math test? I'll just go with Option C and hope for the best.

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Estrella

1 year ago

Hold up, isn't the safety margin the incremental money you make per unit after the variable costs? Option D seems to be the definition I've got in mind.

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