CIPS L4M2 Exam With Confidence Using Practice Dumps

Explanation

In this question, you have to calculate price variance and quantity variance.

Last month, 1 tonne of steel costed $216. This month, the price decreases to $181.1. Price variance = (P1 - P2)*Q2 = ($216-$181.1)*11 = $383.9

Quantity variance = (Q1-Q2)*P1 = -$216

Price variance is greater than quantity variance, therefore, price variance is the main cost driver.

LO 1, AC 1.4

Explanation

When using conformance specification, the buying organisation is responsible for the performance of the purchase. If the product fails due to poorly designed specification, the buyer is wholly responsible for it. It cannot blame the supplier for the failure because they still provided 'fit for purpose' product.

'Time to produce specification is shortened': Conformance specification requires details on dimen-sion, materials, design, etc. With such requirements, time to produce a complete conformance specification is often longer than producing performance specification.

'Buyer cannot control the inputs': Conformance specification is a list of inputs from buyer, so buyer has control over the inputs that will make the product. It also means that buyer is responsible for any product failure.

'Buyer may face liquidity risks': Liquidity means that how quick a business turns its assets into cash. This is a financial term, it does not link directly with specification failure.

Explanation

ANSI is the American National Standards Institute. It is responsible for providing technical stand-ards in the US

LO 3, AC 3.1