CIPS L4M2 Practice Exams
Last updated on Oct 22,2026- Exam Code: L4M2
- Exam Name: Defining Business Needs
- Certification Provider: CIPS
- Latest update: Oct 22,2026
What are the direct risks that can result from procurement receiving inadequate specifications from a research and development department?
- A . Increased business size
- B . Under or over delivery of goods
- C . Increased labour costs
- D . Under or over statement of need
What are the direct risks that can result from procurement receiving inadequate specifications from a research and development department?
- A . Increased business size
- B . Under or over delivery of goods
- C . Increased labour costs
- D . Under or over statement of need
What issue is a buyer most likely to experience if the technical specification sent to suppliers as part of a Request For Quotation (RFQ) is insufficient?
- A . The buyer will receive quotes at different times from suppliers, which will require greater coordination with other members of the sourcing team
- B . The buyer will receive costs from suppliers in different formats, which will make it difficult to compare costs on a like-for-like basis
- C . The buyer will not be able to compare different suppliers’ costs directly as the suppliers will have had to make assumptions on the specification
- D . The buyer will need to work with their finance colleagues and business stakeholders to adjust the budget available for the project
What issue is a buyer most likely to experience if the technical specification sent to suppliers as part of a Request For Quotation (RFQ) is insufficient?
- A . The buyer will receive quotes at different times from suppliers, which will require greater coordination with other members of the sourcing team
- B . The buyer will receive costs from suppliers in different formats, which will make it difficult to compare costs on a like-for-like basis
- C . The buyer will not be able to compare different suppliers’ costs directly as the suppliers will have had to make assumptions on the specification
- D . The buyer will need to work with their finance colleagues and business stakeholders to adjust the budget available for the project
What issue is a buyer most likely to experience if the technical specification sent to suppliers as part of a Request For Quotation (RFQ) is insufficient?
- A . The buyer will receive quotes at different times from suppliers, which will require greater coordination with other members of the sourcing team
- B . The buyer will receive costs from suppliers in different formats, which will make it difficult to compare costs on a like-for-like basis
- C . The buyer will not be able to compare different suppliers’ costs directly as the suppliers will have had to make assumptions on the specification
- D . The buyer will need to work with their finance colleagues and business stakeholders to adjust the budget available for the project
The procurement team of a global supermarket has created a business case for a corporate social responsibility (CSR) sourcing strategy to meet the corporate objective of sustainability. This would require sourcing only from suppliers who meet ethical standards, a reduction in plastic, and using recycled material where possible.
Which of the following business benefits would be mentioned in the business case? Select TWO that apply:
- A . Fulfilment of a business objective
- B . Increased capacity
- C . Leverage of technology
- D . Improved brand equity
- E . Reduced cost
A, D
Explanation:
A (Fulfilment of business objective): Aligning procurement practices with sustainability goals supports the overall corporate strategy.
D (Improved brand equity): Sustainable practices enhance reputation and consumer trust.
Other options, like increased capacity or reduced costs, are secondary or unrelated to CSR initiatives.
Reference: CIPS Level 4, CSR and Sustainability.
A charity is reviewing their spend and budget after an operation in flooded areas. They realise that the operators save money against the budgeting plan.
This saving is known as…?
- A . Negative budget
- B . Positive variance
- C . Negative variance
- D . Positive budget
C
Explanation:
The difference between the actual spend and budgeted spend is known as variance.
The formula for variance is:
Variance = Actual spend – Budgeted spend
Variances can be adverse/unfavourable or favourable ie they can be positive or negative.
Be very careful with these terms. A positive or a negative variance may be favourable or it may be adverse/ unfavourable.
Adverse variances
Adverse variances are those variances that are unfavourable to the firm. Examples would be sales below plan; costs above budget, cash receipts lower than expected, and overtime payment more than forecast.
Favourable variances
Favourable variances are those variances that are beneficial to the business. Examples would be sales ahead of plan, costs below budget, and wages below forecast. Positive variance A positive variance occurs where ‘actual’ exceeds ‘planned’ or ‘budgeted’ value. Examples might be actual sales are ahead of the budget.
Negative variance
A negative variance occurs where ‘actual’ is less than ‘planned’ or ‘budgeted’ value. Examples would be when the raw materials cost less than expected, sales were less than predicted, and labour costs were below the budgeted figure.
When the operators create saving, it means that the Actual spend is less than Budgeted spend.
Therefore the variance is negative.
Reference: – Variance analysis
– CIPS study guide page 57-59
LO 1, AC 1.4
The finance department of a large organisation is collating budget information received from its various departments, including sales, marketing, and production. These budgets include forecast information on costs and revenues.
The finance department will be using the information to establish which of the following?
- A . The expected profit levels
- B . The predicted changes in the economy
- C . The level of market competition
- D . The volume of returns
Which of the following specific markets is most likely to have product shortage by nature?
- A . Retail
- B . Financial
- C . Construction
- D . Services
- E . Agriculture
E
Explanation:
Products used in agriculture can be subject to shortage due to natural disasters.
Reference: CIPS study guide page 81
LO 2, AC 2.1
James Hunter has received a price increase request from a supplier with its justification. The supplier has requested the price increase because there has been an increase in staff sickness absence. James has reviewed the original contract and found a buyer provision for ‘risk for additional resource.’ This is the first year the supplier has experienced a resource issue.
What should James do?
- A . Review the request in three months
- B . Request additional budget
- C . Reject the price increase
- D . Accept the price increase
C
Explanation:
Given that the provision for ‘risk for additional resource’ exists and this is the first occurrence, James should reject the price increase as the supplier should account for these risks in their pricing.
Reference: CIPS Level 4, Contract Management and Cost Control.