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CIPS Contract Administration Sample Questions (Q51-Q56):

NEW QUESTION # 51
What is a contract?

* A. An agreement between two or more parties which, all other things being equal, is in-tended to be enforceable by law.
* B. An agreement between two or more parties which is intended to be enforceable by any means feasible.
* C. An agreement between two or more parties which is intended to be honoured.
* D. An agreement between two or more parties which is enforceable in law.
Answer: D

Explanation:
An agreement between two or more parties which is enforceable in law.
This definition separates a contract from a social or domestic arrangement, in that contracts are in-tended to be enforceable at law. The other answers shown here dilute the concept, and so are unac-ceptable as answers to the question.

NEW QUESTION # 52
A bottle of sparkling water sells for $1. The variable cost is 50 cents. Fixed costs for the business are $100,000 (one hundred thousand dollars). How many bottles of water must be sold for the business to reach breakeven point?

* A. 200,000
* B. 2 million
* C. 50,000
* D. 20,000
Answer: A

Explanation:
The 'contribution' (selling price minus variable cost) for each bottle is 50 cents. Divide the fixed costs by the contribution (100,000 / 0.5) = 200,000 If your textbook or tutor has not covered this type of calculation, don't worry; it is a difficult ques-tion and is unlikely to be a significant issue in the CIPS examination.

NEW QUESTION # 53
'A purchasing procedure whereby potential suppliers are invited to make a firm and unequivocal offer of the price and terms on which they will supply specified goods or services which, on ac-ceptance, shall be the basis of the subsequent contract'

* A. Request for information
* B. Invitation to tender
* C. Competitive dialogue
* D. Expression of interest
Answer: B

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'.

NEW QUESTION # 54
According to Lysons and Farrington, two authors recommended by CIPS, which of the following are cost-based pricing models, as opposed to market-driven pricing models? Choose two.

* A. Marginal pricing
* B. Promotional pricing
* C. Penetration pricing
* D. Rate of return pricing
Answer: A,D

Explanation:
Both penetration pricing and promotional pricing begin with the market price. Marginal pricing and rate of return pricing both look at the costs of doing something, and base their calculations on cost. These last two are therefore cost-based approaches to pricing.

NEW QUESTION # 55
Tolerate, transfer, terminate or ...?

* A. Take
* B. Treat
* C. Try
* D. Test
Answer: B

Explanation:
This is about risk, and the answer is 'treat'.
Risk management strategies can be classified into 'the 4 T's', which you need to know for your ex-am.
Treating the risk is essentially seeking to minimise the likelihood or impact of the risk. An example might be to carefully monitor key suppliers' ongoing financial performance to minimise the likeli-hood of their going into liquidation during the course of a contract with us. Etc.

NEW QUESTION # 56
......

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