D2

Centres of Learning in:

 England
 Scotland
 Wales

EXAM QUESTIONS
D2 Business Needs in Procurement and Supply
ABA Procurement
51 Ivy Road
Norwich, NR5 8BF
Tel: +44 1603 251754
cips@anglia-business-academy.co.uk
www.aba-procurement.com
CIPS Exam Sample Questions – Learning Objective 1
Exam Question 1

July 2013, A) Using examples, explain the difference between direct and indirect costs (5)
January B) Describe FIVE factors that a buyer might expect a supplier to take into
2015 account when setting the selling price of their product (20)

Revision Notes

November A) Using an example to illustrate, explain the term ‘budget’ (5)

2013, May B) Describe TWO approaches to budgeting used to establish procurement
2015 targets (8)
C) Explain THREE purposes of preparing a budget for a procurement function
(12)
Revision Notes

January A car manufacturing company is preparing a business case for the purchase of a new
2014 machine, to be used in the assembly of vehicles.

A) Describe FOUR commercial benefits that might be used as criteria to justify

the business case (16)
B) Describe ONE cost and ONE risk that could be included in the business case
(9)
Revision Notes
Exam Question 1

March A) Define the term ‘total lifecycle costing’ (5)

2014, B) Describe FIVE costs that should be considered when calculating the lifecycle
March cost of an item, apart from the purchase price of the item. (20)
2015

Revision Notes

May 2014 A) Using examples to illustrate, explain the differences between a straight re-buy
and a modified re-buy, as types of purchase (10)
B) Describe FIVE activities that a procurement function might undertake when
contributing to the development of a business case for a new purchase (15)
Revision Notes

July 2014 A) When operating financial budgets explain the difference between an
incremental budget and a zero- based budget. (6)
B) Describe THREE cash outflows that might be entered in a procurement
functions cash budget (9)
C) The procurement function of a shirt manufacturing company forecasted that
the cost of the imported material needed would be $4.00 per shirt, after the
first three months of production it was established that the actual cost was
$3.50 per shirt. Suggest FIVE possible reasons for the variance where the
actual material cost is lower than the forecasted cost (10)
Revision Notes
Exam Question 1

November A) Explain the difference between the terms ‘cost’ and ‘price’ (5)
2014, B) Describe FIVE sources of data that a buyer might consult to obtain
March information about the market prices of inputs (20)
2016

Revision Notes

July 2015 Explain FIVE objectives of a business case that could be used as the criteria to judge
its success. (25)

Revision Notes

November A) Outline FIVE purposes of financial budgets (10)

2015 B) Using examples, describe THREE reasons why the actual price of bought-in
materials might be lower than the price shown in the purchasing budget. (15)
Revision Notes
Exam Question 1

January A) When operating financial budgets explain the difference between an

2016 incremental budget and a zero-based budget. (6)
B) Describe THREE cash outflows that might be entered in a procurement
function’s cash budget. (9)
C) The procurement function of a shirt manufacturing company forecasted that
the cost of the imported material needed would be $4-00 per shirt. After the
first three months of production it was established that the actual cost was
$3-50 per shirt.
Suggest FIVE possible reasons for the variance where the actual material cost
is lower than the forecasted cost. (10)
Revision Notes

March A) Explain the difference between the terms ‘cost’ and ‘price’. (5)
2016 B) Describe FIVE sources of data that a buyer might consult to obtain
information about the market prices of inputs. (20)
Revision Notes

Revision Notes
CIPS Exam Sample Questions – Learning Objective 2
Exam Question 2

July 2013 A) Explain THREE different purposes of key performance indicators in contracts
with suppliers (15)
B) Describe TWO key performance indicators that could be included in a
contract for catering services (10)
Revision Notes

November Explain FIVE reasons why a buyer might use a performance (output based)
2013 specification rather than a conformance specification. (25)

Revision Notes

January A) Outline FIVE Characteristics of an effective specification (10)

2014, B) Explain THREE reasons in favour of the purchasing function becoming
January involved in the drafting of a specification (15)
2015

Revision Notes
Exam Question 2

March A) Explain FOUR reasons why writing a specification for services may be more
2014 difficult than writing a specification for physical products (16)
B) Explain THREE reasons why a specification may not be effective in
communicating requirements (9)
Revision Notes

May 2014 A) Describe THREE circumstances in which a conformance based specification

could be used (15)
B) Explain ONE possible advantage and ONE possible disadvantage of involving
suppliers in producing a specification (10)
Revision Notes

July 2014 A) Explain the reasons for using standards within specifications. (9)
B) Describe FOUR typical key performance indicators (KPIs) and outline
how they might be used to measure performance in a contract (16)
Revision Notes
Exam Question 2

November A) Explain THREE advantages of using Key Performance Indicators (KPIs) in a

2014 contract (15)
B) Explain TWO potential information security risks that should be addresses in
the specification for a new computer system. (10)
Revision Notes

March A) Outline FIVE characteristics of an effective specification

2015 B) Explain THREE reasons in favour of the purchasing function becoming
involved in the drafting of a specification
Revision Notes

May 2015 A) Outline FIVE social or environmental criteria, which could be included in a
specification. (10)
B) Describe FIVE typical sections, other than social or environmental, that should
be included in a specification. (15)
Revision Notes
Exam Question 2

July 2015 A) Explain FOUR reasons why writing a specification for services may be more
difficult than writing a specification for physical products.
B) Explain THREE reasons why a specification may not be effective in
communicating requirements.
Revision Notes

November A) Describe the role of a specification at THREE different stages within the
2015 procurement cycle. (9)
B) Assess FOUR potential consequences of drafting a poor specification for a
contract. (16)
Revision Notes

January A) Describe THREE circumstances in which a conformance-based specification

2016 could be used. (15)
B) Explain ONE possible advantage and ONE possible disadvantage of involving
suppliers in producing (10)
Revision Notes
Exam Question 2

March A) Outline FIVE content sections that might be included in a technical

2016 specification. (10)
B) Explain FIVE disadvantages of using a brand name in a specification. (15)
Revision Notes
CIPS Exam Sample Questions – Learning Objective 3
Exam Question 3

July 2013 A) Outline FIVE examples of contractual terms that might be used in a
commercial agreement (15)
B) Suggest conditions that may be included in a contract to ensure a supplier
complies with recognised ethical and labour standards (10)
Revision Notes

November A) Outline FIVE advantages and FIVE disadvantages of using a model form
2013 contract. (10)
B) Explain the di8fferences between these pricing arrangements
i) Cost plus Arrangements
ii) Target Costing Arrangements (15)
Revision Notes

January A) Explain THREE sources of contractual terms for contracts between

2014 purchases and suppliers (15)
B) Outline TWO types of insurance that a buyer might require a supplier to
have as part of a commercial contract (10)
Revision Notes
Exam Question 3

March 2014 A) Explain THREE areas where a suppliers and a buyers terms may differ prior
to the agreement of a contract (15)
B) Explain the difference between liquidated damages clauses and ‘penalty
clauses’ in contracts (10)
Revision Notes

May 2014 Explain FIVE types of pricing arrangements that may be used in contractual
agreements (25)

Revision Notes

July 2014 A) Explain the following types of pricing arrangement and their use
i) Cost plus fixed fee (5)
ii) Cost plus incentive fee (5)
iii) Cost plus award fee (5)
B) Explain what is meant by an indemnity clause and provide an
example of how such a clause may be used (10)
Revision Notes
Exam Question 3

November A) Describe, with am example, the following price arrangements in commercial

2014 agreements:
i) Fixed Price arrangements
ii) Incentive price arrangements
iii) Cost- plus arrangements (9)
B) Explain TWO advantages of fixed price purchase arrangements for a
purchasing organisation (8)
C) Explain TWO elements that may cause price fluctuations in a cost plus
purchase arrangement (9)
Revision Notes

January A) Explain THREE sources of contractual terms for contracts between

2015 purchasers and suppliers. (15)
B) Outline TWO types of insurance that a buyer might require a supplier to
have as part of a commercial contract. (10)
Revision Notes

March 2015 Explain the purposes of the following clauses in contracts:

a) Indemnities (5)
b) Sub- contracting (5)
c) Insurances (5)
d) Guarantees (5)
e) Liquidated Damages (5)
Revision Notes
Exam Question 3

May 2015 A) Explain TWO reasons why a ‘fixed price’ contractual arrangement might not
be acceptable to a supplier. (10)
B) Explain THREE advantages of using bespoke (contract specific) terms in a
contract, rather than using standard terms and conditions or model form
contracts (15)
Revision Notes

July 2015 A) Explain THREE areas where a supplier’s and a buyer’s terms may differ prior
to the agreement of a contract. (15)
B) Explain the difference between ‘liquidated damages clauses’ and ‘penalty
clauses’ in contracts. (10)
Revision Notes

November A) Describe, with an example, the following price arrangements in commercial

2015 agreements:
i) Fixed price arrangements
ii) Incentive price arrangements
iii) Cost-plus arrangements. (9)
B) Explain TWO advantages of fixed price purchase arrangements for a
purchasing organisation. (8)
C) Explain TWO elements that may cause price fluctuations in a cost-plus
purchase arrangement. (8)
Revision Notes
Exam Question 3

January A) Outline FIVE express terms that might be used by a supplier in a commercial
2016 agreement for the supply of goods or services.
B) Explain TWO benefits for a purchaser of using a fixed-price arrangement
with a supplier.
Revision Notes

March 2016 A) Explain TWO examples of model forms of contract that could be used for a
major project. (10)
B) Outline the purpose and main content of the following types of contractual
clause:
i) Sub-contracting clause
ii) Insurance clause
iii) Exclusion clause. (15)
Revision Notes

Revision Notes
CIPS Exam Sample Questions – Learning Objective 4
Exam Question 4

July 2013 A shoe retailer, that currently manufactures in its own shoes, is now considering
buying in the shoes from an external supplier

A) Outline FOUR factors that the company should consider when deciding
whether to buy in the shoes or continue to manufacture them (16)
B) Explain the role of the procurement function in the procurement process, if
the company decides to outsource the supply of shoes. (9)
Revision Notes

November A university has decided to outsource two activities; catering and facilities
2013 management

A) Define the term ‘Outsourcing’ (5)

B) Describe THREE benefits for the university of outsourcing these activities (12)
C) Describe TWO disadvantages for the university of outsourcing these activities
(8)
Revision Notes

January Discuss the stages of the procurement process when an organisation outsources an
2014 activity. Use examples to illustrate your discussion (25)

Revision Notes
Exam Question 4

March Describe FIVE risks for an organisation of outsourcing a strategic function, such as
2014 information Technology management (25)

Revision Notes

May 2014, Explain the following express contract provisions commonly used in outsourcing
March contracts:
2016
i) Confidentiality
ii)Indemnities
iii)
Performance Management
iv)Liquidated Damages
v) Dispute Resolution (25)
Revision Notes

July 2014, Explain FIVE factors that a manufacturing company will take into account when
May 2015 deciding whether to make a component itself or whether to buy it from a supplier

Revision Notes
Exam Question 4

November A) Explain the meaning of the term ‘make/do or buy decision’ for goods or
2014, services (5)
November B) Describe FIVE factors that an organisation may take into account when
2015 making a ‘make/do or buy decision’ for goods or services (20)

Revision Notes

January An organisation has decided to outsource two activities: catering and facilities
2015 management

A) Define the term ‘ outsourcing’ (5)

B) Describe THREE benefits for the organisation of outsourcing these activities
(12)

Describe TWO disadvantages for the organisations of outsourcing these activities (8)

Revision Notes

March A) Describe FOUR factors that have contributed to the growth of outsourcing
2015, July (16)
2015 B) Explain THREE reasons why outsourcing projects may fail to achieve their
expected benefits (9)
Revision Notes
Exam Question 4

January A) Describe FOUR benefits for an organisation of outsourcing its procurement

2016 function to a third party. (16)
B) Outline THREE risks for an organisation of outsourcing its procurement
function to a third party. (9)
Revision Notes

i)

Revision Notes

Revision Notes