L3M3 Questions and Answers

Explanation

The contract clause may refer to or include both gainshare and painshare elements. If all goes well, gains to be shared; if things go badly, pain to be shared. The ratio does need to be 5050 - the parties can discuss / negotiate as they wish / agree.

One is actively discouraged from talking about penalties, which contain a notion of punishment, de-spite the rather odd fact that your syllabus contains the term 'penalty clauses'.

Explanation

Specification creep - where the requirement becomes more complex or sophisticated than originally thought necessary for the buying organisation's purposes. Naturally, this can be expected to increase cost to the buying organisation.

Explanation

The best quotation is selected, which would meet the specification as well as meeting the other re-quired criteria; and in order to progress things round the procurement cycle, a purchase order would be issued.

Explanation

The 'firm and unequivocal offer' and 'the basis of a contract' indicate the reference to a formal and binding tender procedure. The answer is therefore 'invitation to tender'.

Explanation

Other customer data.

It would, I think, be very unusual for a contract manager to feel it appropriate to ask for information from a supplier representative about other customers. Business partners normally want their dealings to be private. However, in informal discussions, in the normal course of conversation, information is often transferred in a benign manner.

Explanation

Early supplier engagement - one of the assessment criteria for this course (3.1)

Explanation

An opportunity cost is the cost of not being able to do something else.

For example, if a firm opts to build a new factory, it may not be able to create ten new retail outlets which was another option open to it, in spending these particular funds. Or if you buy a holiday, you may not be able to buy a new television. The television is the opportunity cost of the holiday ie the benefit foregone.

The other types of cost shown are methods of classifying actual (real) costs. Opportunity costs are, in a sense, not real; they are hypothesized and therefore do not show in the balance sheet or profit and loss account of a business.

Explanation

The Executive Summary summarises the situation for busy executives to save them working all the way through the detail.

The summary needs to be very well written, accurately reflective of the entire document, and in-clude the key points needed to make a balanced decision.

The executive summary should be written last of all the sections, and is often the only part of a document which will be read.

Explanation

Weaknesses.

One might use a SWOT analysis when appraising potential suppliers for a significant purchase.

Explanation

The three-year contract is a term contract.

The other requirements shown are of a 'one-off' nature, and could therefore be called 'spot'purchases.

Explanation

'Invitation to treat' is less than an offer ie it is not capable of being accepted in any contractual sense.

A common example given of an invitation to treat are goods on display in a shop window.

Explanation

When profitability is spoken of as a % the selling price, the profit element is called the margin.

Explanation

'Five-Why Analysis' or 'Why-Why Analysis' is an approach to trying to determine the cause of an event. It can be used to link to / in conjunction with an Ishikawa diagram. The principle is thatone repeatedly (as often as necessary, not necessarily limited to five) asks 'why?', and eventually an un-derlying reason will emerge, which if addressed effectively, will successfully resolve the problem. This is something which can often be observed naturally in small children. 'Why, Daddy?'. 'But why, Daddy?. Etc. (Or Mummy)

Explanation

If it's included with the goods, it's likely to be a delivery note; and the buyer's equivalent would be a goods received note.

Explanation

'Is it acceptable, feasible and suitable?' are the tests.

Explanation

Comparison of prices across different suppliers would be called 'price analysis'; drilling down into costs of making or doing something would be called 'cost analysis'.

Explanation

Economic.

I think foreign exchange at least couldn't fit into any other STEEPLE factor, so that's a clincher and it has to be 'economic'.

Explanation

These are 'model form' contracts. Industry standard templates eg NEC ('New Engineering Con-tract'); or FIDIC model form contracts. You will find some examples produced by CIPS on the CIPS website eg for IT procurements.

Explanation

Cost of setting up the tender which is not a cost of the item itself.

All the other costs are related to the item itself.

Explanation

Surprisingly, 'declared gifts of nominal value' can be accepted.

Explanation

All of those shown are barriers to trade.

Quotas place a numerical limit on what may be imported; embargoes ban certain goods (for exam-ple, no goods originating in Israel may be imported); duties discourage imports; subsidies of local industries undercut foreign competitors (have a search for stories on large airlines being subsidised in various countries, commonly for reasons of prestige); complex customs procedures make import-ing foreign goods difficult (great examples involving France); exchange controls limit the amount of a currency which can be converted into another currency, limiting payment possibilities for imports. Etc.

Of course, most countries using any of these mechanisms repeatedly eulogise on the benefits of free trade....

Explanation

The calculation which needs to be done is one hundred thousand (dollars) divided by the contribu-tion per bottle. The contribution per bottle is one dollar minus the variable cost - 25 cents. Thus the contribution is 75 cents. One hundred thousand divided by $0.75 = 133,333. Note the answer is in units - in response to the QUESTION NO: of how many bottles / units must be sold to break even.

For people who feel they have difficulty with calculations, just look at the possible answers. If the contribution is a bit less than a dollar, and the fixed costs are 100,000, we would expect the answer to be a number a little over 100,000 - one of the answers fits the bill, and this is the correct answer. So the QUESTION NO: may look complicated or difficult, but if you stay calm and think it through, it's not that difficult.