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Prepare for the CIPS Defining Business Needs exam with our extensive collection of questions and answers. These practice Q&A are updated according to the latest syllabus, providing you with the tools needed to review and test your knowledge.
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The questions for L4M2 were last updated on Dec 18, 2024.
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A buyer may consider switching from one product or service to another, or from one supplier to another. Which of the following options are a type of switching cost?
Inflation cost
Historical cost
Retraining cost
Modification cost
One of the disadvantages of using standards in specification is that...
Using standards in specification is very convenient. They reduce the time and effort to produce. They tend to be very accurate with correct technical terminologies. They are well recognised and accepted by a wide range of suppliers and buyers. However, since a standard is very specific, complex and lengthy, it requires a lot of time to be drafted and approved. Therefore, standard tends to be static and don't encourage innovation. It may also not accommodate latest technology and trends.
LO 3, AC 3.1
Which of the following might be consequences of over-specification? Select TWO that apply:
Over-specification can cause problems to buying organisation, include the following:
- Higher expense due to unnecessary features embedded into the product
- Stifle competition because higher requirements will lead to fewer suppliers in the market are able to supply
- Harder to evaluate the trade-offs between different features and attributes in the specification
LO 3, AC 3.3
Which of the following are features of a conformance specification? Select TWO that apply.
A company buys components from its supplier. However, the supplier has not sent the invoice to the buyer and the buyer will not pay until next month. How will that amount of money be shown in the financial statements of the buying organization?
The buyer won't pay the supplier until next month. This is a liability to the buyer. This amount can be recorded as accrued expense or accounts payable. On the other hand, the supplier has not sent the invoice, so it should be accrued expense.
Both accounts payables and accrued expenses are liabilities. Accounts payable is the total amount of short-term obligations or debt a company has to pay to its creditors for goods or services bought on credit. With accounts payables, the vendor's or supplier's invoices have been received and recorded.
On the other hand, accrued expenses are the total liability that is payable for goods and services that have been consumed by the company or received. However, accrued expenses are those bills in which an invoice or bill has not yet been received. As a result, accrued expenses can sometimes be an estimated amount of what's owed, which is adjusted later to the exact amount, once the invoice has been received.
Conversely, accounts payable should represent the exact amount of the total owed from all of the invoices received.
- CIPS study guide page 55-56
- Understanding Accrued Expenses vs. Accounts Payable (investopedia.com)
LO 1, AC 1.4
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