Pass L4M7 Exam Latest Practice Questions Updated on Jul 22, 2023
CIPS L4M7 Study Guide Archives
The CIPS L4M7 certification exam is an excellent opportunity for professionals in the asset management field to demonstrate their expertise and enhance their career prospects. This certification is recognized globally and is a mark of distinction for professionals who are committed to excellence in asset management. If you are looking to enhance your knowledge and skills in this field and take your career to the next level, the CIPS L4M7 certification exam is definitely worth considering.
The CIPS L4M7 exam is divided into three units, each of which is designed to build on the knowledge and skills developed in the previous unit. The first unit covers the principles of asset management and the importance of whole-life costing. The second unit focuses on the procurement of assets, including the selection of suppliers, contract management, and the use of procurement tools and techniques. The third unit covers the operation and maintenance of assets, including performance management, risk management, and the use of technology in asset management.
NEW QUESTION # 75
Which of the following is the formula for calculating the re-order level?
- A. Average usage in a lead-time / Required level of safety stock
- B. Average usage in a lead-time + Required level of safety stock
- C. Required level of safety stock x Average usage in a lead-time.
- D. Required level of safety stock - Average usage in a lead-time
Answer: B
Explanation:
In management accounting, reorder level (or reorder point) is the inventory level at which a com-pany would place a new order or start a new manufacturing run.
Reorder level depends on a company's work-order lead time and its demand during that time and whether the company maintain a safety stock.
If a company maintains a safety stock, reorder level calculation changes are follows:
Reorder Level = Average Demand × Lead Time + Safety Stock
Reference:
LO 2, AC 2.3
NEW QUESTION # 76
Which of the following are most likely the benefits of using unit loads? Select TWO that apply.
Increase transport time of each item
- A. Safer handling
- B. Unit loads must be placed on pallets
- C. Reduce handling cost of one unit
- D. Minimise space utilisation
Answer: A,C
Explanation:
The concept of a unit load is to create a stable and secure, easy-to-move group of stock that is fast to load and unload from vehicles.
The advantages of unit load concepts are as the following:
* More items can be handled at the same time, thereby reducing the number of trips required and, potentially, reducing handling costs, loading and unloading times, and product damage.
* Enables the use of standardized material handling equipment.
Reference:
LO 1, AC 1.3
NEW QUESTION # 77
A supermarket calculates that the average holding cost for an item is $1.50 per cubic meter per day. A beer pallet which has volume of 0.5 cubic meter will be stored for 5 days. What is the holding cost of this beer pallet?
- A. $4.50
- B. $3.75
- C. $4.25
- D. $4.00
Answer: B
Explanation:
The holding cost per day of the beer pallet is equal to 1.50/2=0.75
The beer pallet is stored for 5 days, the total holding cost is: 0.75*5=3.75.
LO 2, AC 2.2
NEW QUESTION # 78
Which of the following is essential to effective implementation of just-in-time?
- A. Strong links between the suppliers and the buying organisation
- B. Regular machine changeovers
- C. Larger warehouse for larger amount of inventory
- D. No need for smoothing production
Answer: A
Explanation:
For JIT manufacturing to succeed, companies must have steady production, high-quality workmanship, glitch-free plant machinery, and reliable suppliers.
JIT production systems cut inventory costs because manufacturers do not have to pay storage costs. Manufacturers are also not left with unwanted inventory if an order is canceled or not fulfilled.
Reference:
- Just in Time (JIT)
- CIPS study guide page 122-124
LO 2, AC 2.3
NEW QUESTION # 79
A restaurant needs to buy a new freezer. The owner applies total cost of ownership model to calcu-late the life-time cost of the freezer. This equipment has a price tag of $1,000, the supplier can offer free delivery if the restaurant pays off immediately. Estimated electricity consumption of the freezer is $200 in 5 years. The supplier ascertains that the freezer is very durable, buyer doesn't need to care about maintenance costs. However, if the restaurant needs better protection from breakdowns, the warranty is free for the first 12 months after the purchase. This warranty package can be extended once for another 24-month period with the cost of $75. After 5 years, the buyer will be able to resell this freezer for $250. What would be the estimated total cost of ownership of this freezer if the restaurant owner buys the extended warranty package?
- A. $1,525
- B. $1,200
- C. $1,275
- D. $1,025
Answer: D
Explanation:
The total cost of ownership would be the sum of all estimated costs.
The costs are as the following:
- Purchase price: $1,000
- Electricity consumption: $200
- Extended warranty: $75
Total expense = $1,000 + $200 +$75 = $1,275. Then subtract the resale price from this sum, the total cost of ownership is $1,025.
Reference:
LO 3, AC 3.1
NEW QUESTION # 80
Which of the following is the correct statement about total ordering cost?
- A. Fall with the per period usage rate
- B. Equal the number of orders placed times the cost of placing an order
- C. Rise as the average stock level rises
- D. Rise as the order quantity rises
Answer: B
Explanation:
Typically, ordering costs include expenses for a purchase order, labor costs for the inspection of goods received, labor costs for placing the goods received in stock, labor costs for issuing a supplier's invoice and labor costs for issuing a supplier payment. These costs are irrelevant from the size of the order and are incurred every time a firm places an order.
The total ordering cost will be equal to ordering cost per order multiply with number of orders.
Reference:
LO 2, AC 2.2
NEW QUESTION # 81
Which of the following costs does the EOQ minimise?
- A. Total cost of annual inventory cost
- B. Total cost of ordering inventory
- C. Total cost of safety stock
- D. Total cost of carrying stock
Answer: A
Explanation:
Economic order quantity (EOQ) was developed in 1913 by Ford W.
Harris and has been refined over time. The formula assumes that demand, ordering, and holding costs all remain constant. The EOQ minimizes the total annual inventory cost.
EOQ formula is as follow:
LO 2, AC 2.3
NEW QUESTION # 82
Which type of codes can a barcode laser scanner (linear scanner) read?
- A. 1D barcode
- B. QR code
- C. Numerical code
- D. Aztec code
Answer: A
Explanation:
One-dimensional (or 1D) barcodes systematically represent data by varying the widths and spac-ings of parallel lines. These include some of the most traditional and well-recognized barcode types, such as the UPC and EAN codes. 1D barcodes are also commonly referred to as linear barcodes.
Two-dimensional (2D) barcodes look like squares or rectangles that contain many small, individual dots. QR codes, Data matrix and Aztec codes are examples of 2D barcodes Numerical code contains all numbers, no letters There are two different scan engine types (laser scanner versus imager) for interpreting the infor-mation provided in the barcode. Many companies producing the technology capable of reading the barcode data uses the term "scanning" regardless of the type of scan engine used. For the purposes of these FAQs, we are trying to draw a clearer distinction for you.
Linear (1D) codes can be scanned with a traditional laser scanner. A laser scan engine uses a laser and mirror to create the bar that scans the information. 1D barcode scanners will only interpret the linear barcode scanning technology. 1D barcode scanners are typically less expensive since the type of encryptions they can decode is limited.
LO 1, AC 1.2
NEW QUESTION # 83
MRP software is applied to schedule which of the following?
- A. Production processes
- B. Tax accounting
- C. Human resource management
- D. Executive meetings
Answer: A
Explanation:
Material Requirements Planning (MRP) software manages material requirements for manufacturing processes.
LO 2, AC 2.3
NEW QUESTION # 84
Which of the following is the character that allows the computer to verify whether a product code is entered correctly?
- A. 3-digit prefix
- B. Barcode
- C. Radio frequency identification
- D. Check digit
Answer: D
Explanation:
Many codes have integrated check digits. These are additional numbers or characters added to codes that a computer uses to verify the number is valid. The intention is to reduce the likelihood of miskeying an item and hitting an alternative live item. More often, a system is devised which a computer can calculate using combination of numbers.
Barcode is a graphic symbol used to convey data. Typically the characters in a barcode symbol consist of bars/space pattern. Barcode is the method of representing data in a visual, machine-readable form. Initially barcodes represented data by varying the width and spacing of parallel lines.
Radio-frequency identification (RFID) uses electromagnetic fields to automatically identify and track tags attached to objects.
A prefix is an affix which is placed before the stem of a word or a string. A product code may have prefix which indicates its group, country, origins, etc.
Reference:
LO 1, AC 1.2
NEW QUESTION # 85
Which of the following are main objectives of warehouse operations? Select TWO that apply.
- A. To ensure stock available when customers demand
- B. To maintain the highest level of buffer stock
- C. To generate check digits for a product code
- D. To minimise stock loss and deterioration
- E. To create sufficient space for redundant stock
Answer: A,D
Explanation:
The purposes of stores and warehouses are:
1. Maximum use of space.
2. Ready access to all items.
3. Efficient movement of goods.
4. Effective utilization of labour & equipment's
5. Maximum protection of items
6. Good-house-keeping.
Reference:
- Warehousing: Meaning, Objectives and Functions
- CIPS study guide page 3
LO 1, AC 1.1
NEW QUESTION # 86
XYZ Inc opens a tender to purchase new forklift trucks for their new established warehouse. In the final round, there are two suppliers remain who offer two different bids. Supplier A's bid has high initial investment. After calculating the net present value, the NPV in year five is positive. On the other hand, supplier B's bid has low purchase price, with the NPV in year five is negative. If the NPV is the sole selection criterion, XYZ Inc should select the bid which has...?
- A. Positive NPV
- B. Zero NPV
- C. The lowest NPV
- D. Negative NPV
Answer: A
Explanation:
Net present value (NPV) is the 'today' net value that deprives from 'future' cash flow of an invest-ment or a capital purchase. Net Present Value is a helpful tool for assessing the total lifetime value of an investment. Procurement professionals or investors can base on this value to make decision to achieve value for money. Generally, an organisation should select the offer which has the highest NPV among their options. Preferably, the NPV of an capital investment should be positive, which means the investment eventually adds value to the business.
Reference:
LO 3, AC 3.2
NEW QUESTION # 87
PPC Refinery (UK) must close down an out-of-date refinery which has very poor environmental performance. The refinery is very sophisticated with many technically complicated machineries, lubricants, coolants and other chemical substances. Decommissioning the refinery is highly risky and hazardous. To manage the decommissioning process well, PPC project team must know these machineries and substances in details. Which document can provide the technical details on the refinery?
- A. Non-disclosure agreement
- B. Corporate social responsibility policy
- C. Original specifications
- D. Code of Conduct
Answer: C
Explanation:
Decommissioning or disposal should start with the original specifications of the assets so that the organisation and supplier can make an appropriate plan. Some specifications also mention the is-sues regarding to end-of-life environmental factors.
Reference:
LO 3, AC 3.3
NEW QUESTION # 88
Which of the following is the most suitable container of fasteners (screws, nails, nuts and bolts,...)?
- A. Pallet
- B. Tote box
- C. Stock cage
- D. Bar rack
Answer: B
Explanation:
Tote box is the reusable storage box. These can be open or have lids or flaps to close them and come in a large variety of sizes and weight loadings.
A tote is ideal for holding and hauling items such as: tools, fasteners, bark dust, dry cement, cords, wires, smaller boxes,...
Pallets are the platform structures designed to support a load and be lifted using the forks (typically seen on forklift trucks and other equipment). These are in a variety of standard sizes and can be made of many materials including plastics, resin, board or timber. Pallets are not containers, but support platforms.
Bar racks are designed to store bars and pipes
Stock cages are available in many sizes and can hold single items or groups of items
Reference:
LO 1, AC 1.1
NEW QUESTION # 89
XYZ Ltd is a major distributor of electrical equipment protection products in the United States. XYZ found that there was a lack of communication between the company and its key supplier, leading to the supplier trying to predict distributor needs and distributor attempting to estimate lead times. Essentially, both the supplier and the distributor have different sets of information, spending time and money trying to predict what the other will do. To deal with this problem, XYZ Ltd decides to implement new inventory management method in which the supplier manage the replenishment of items for sale. Both parties are obliged to share information on variations in demand and stock levels for goods used for or sale. Which inventory management method is XYZ Ltd implementing?
- A. Economic order quantity
- B. Floor-ready merchandise
- C. Vendor managed inventory
- D. Reverse logistics
Answer: C
Explanation:
Floor-Ready Merchandise can be defined as the merchandise that is pre-tagged, pre ticketed and pre-occupied with all the necessary details and information such as marked to their specifications for style, size, type, color and price, this information is required in the retail store and is done before it reaches the retail store.
Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W.
Harris and has been refined over time. The formula assumes that demand, ordering, and holding costs all remain constant.
The full definition of reverse logistics, as according to The Council of Logistics Management, is the process of implementing, controlling, and planning the cost-effective flow of finished goods, raw materials, and in-process inventory. The flow is from the point of consumption (i.e. the customer) to the point of origin (i.e. the manufacturer), to properly dispose of these or to recapture value.
In the scenario, XYZ solves the current situation by letting the supplier to management the inventory and sharing stock level information with the supplier. Vendor managed inventory is the most suitable answer.
Reference:
LO 3, AC 3.1
NEW QUESTION # 90
GAP Ltd is a growing retail business. It spends a lot of money on buying stock for sale. However, the procurement process is still largely manual. This manual process contains a lot of tasks that are repeated for each procurement event and time consuming. The company management team decides to adopt procure-to-pay (P2P) software in order to eliminate duplicate activities and improve process efficiencies. Which type of cost is GAP targeting?
- A. Acquisition costs
- B. Disposal costs
- C. Cost of stockouts
- D. Holding costs
Answer: A
Explanation:
Costs of holding inventory include the following:
* Acquisition cost
* Inventory holding cost
* Costs of stock-outs
Acquisition costs follow the typical procure-to-pay model. Benefits of procure-to-Pay (P2P) software include:
- Vendor Management, which includes researching, selecting, engaging with, and evaluating the performance of suppliers who make up your supply chain.
- Purchase Requisition Workflows, or the formal process of creating and submitting a purchase requisition (PR) for approval to meet a specific business need.
- Purchase Order (PO) Workflows, covering the creation of a formal, detailed PO from the purchase requisition, including information on the quantity and quality of goods and services, as well as specific terms and conditions.
- Receiving, which includes the acceptance of physical goods (or review of quality and completion for services) and entering the accepted order into inventory, tracking, and accounting systems.
- Invoice Management, during which the invoice is compared to the original PO to verify pricing, quality, quantity, and terms have been met.
- Accounts Payable Workflows, wherein the accounts payable department processes the invoice for payment, submits the payment to the vendor, and reconciles any related financial entries in the accounting system.
The software is intended to help reduce the acquisition costs.
LO 2, AC 2.2
NEW QUESTION # 91
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