CIPS L4M5 Practice Exams
Last updated on Oct 23,2026- Exam Code: L4M5
- Exam Name: Commercial Negotiation
- Certification Provider: CIPS
- Latest update: Oct 23,2026
Cost and price analysis is very important for buyers when they are preparing for a negotiation with supplier.
Which of the following is a benefit of knowing supplier’s fixed costs?
- A . The buyer would be able to know the right volume to reach break-even point
- B . The buyer would be able to know the point at which the supplier would reject the offer
- C . With the sole understanding of supplier’s fixed cost, the buyer would be able to know the volume at which supplier maximises their profit in short-run
- D . The buyer would be able to get a comprehensive picture of supplier’s efficiency
A
Explanation:
Knowing supplier’s fixed and variable costs is beneficial for the buyer in a negotiation. With these insights, the buyer would know the volume at which the supplier reaches break-even points and then offers significant discount due to economies of scale.
Reference: CIPS study guide page 80-81
LO 2, AC 2.1
In a commercial negotiation, a procurement professional negotiates on his company’s behalf. The power of buying organisation is the only factor that influences the behaviours of the other party.
Is this assumption true?
- A . Yes, because the outcomes of negotiation are attributable to the buying organisation
- B . No, because personal power of negotiators also attributes to the outcomes
- C . No, because power of supplier is the only factor that influences the other party
- D . Yes, because buyer’s brand, reputation and purchasing spend largely determine the outcomes
B
Explanation:
The assumption is false, because when a procurement professional negotiates on behalf of his employer, he brings the power of his organisation (its brand, reputation and purchasing spend) as well his own personal power (that which is embedded within him) to the negotiation.
From a negotiation perspective, both organisational and personal power have the ability to influence the behaviours of other or the cause of event. This power is clearly core to negotiation, and of enormous important in seeking to achieve the objectives.
After studying Thomas-Kilmann conflict resolution model and considering different approaches carefully, the procurement team of XYZ Ltd. decides to adopt an avoiding approach to the upcoming negotiation with one of their suppliers.
Which of the following will be the objective of XYZ procurement team in this negotiation?
- A . Yielding the supplier’s point of view
- B . Postponing the issue
- C . Seeking a quick middle-ground position
- D . Confronting and trying to find a creative solution immediately
B
Explanation:
Avoiding is unassertive and uncooperative. When avoiding, an individual does not immediately pursue his or her own concerns or those of the other person. He or she does not address the conflict. Avoiding might take the form of diplomatically sidestepping an issue, postponing an issue until a better time, or simply withdrawing from a threatening situation.
LO 1, AC 1.1
After studying Thomas-Kilmann conflict resolution model and considering different approaches carefully, the procurement team of XYZ Ltd. decides to adopt an avoiding approach to the upcoming negotiation with one of their suppliers.
Which of the following will be the objective of XYZ procurement team in this negotiation?
- A . Yielding the supplier’s point of view
- B . Postponing the issue
- C . Seeking a quick middle-ground position
- D . Confronting and trying to find a creative solution immediately
B
Explanation:
Avoiding is unassertive and uncooperative. When avoiding, an individual does not immediately pursue his or her own concerns or those of the other person. He or she does not address the conflict. Avoiding might take the form of diplomatically sidestepping an issue, postponing an issue until a better time, or simply withdrawing from a threatening situation.
LO 1, AC 1.1
Understanding supplier’s mark-up and margin can provide procurement professional a comprehensive insight into supplier’s net profits.
Is this statement true?
- A . Yes, because supplier’s mark-up and margin are two most valuable sources of information to procurement
- B . No, because mark-up and margin inform little about supplier’s net profit
- C . No, because margin is enough to tell procurement about supplier’s profitability
- D . Yes, because these are two indicators of supplier’s future prospect
B
Explanation:
Mark-up and margin allow supplier to make gross profit. Remember that every supplier operates under different cost structures and some are set up to be most profitable at a particular level of volume, so it is dangerous to assume all suppliers can survive on a lower margin if their volume increases. Intelligent buyers understand that mark-up and margin may define gross profits, but they tell you very little about a supplier’s net profits.
LO 2, AC 2.1
When might a buyer decide to use a distributive approach to a negotiation with a supplier?
- A . When they are dependent on that supplier in the future
- B . When there are various suppliers in the market producing a similar product
- C . When procuring an item that is not strategic to the organisation
- D . When a working relationship is important in the future
B
Explanation:
A distributive approach is appropriate when multiple suppliers offer similar products, as this competitive environment allows the buyer to focus on maximizing their position rather than building long-term partnerships. CIPS suggests that a distributive or competitive approach is best used in non-critical purchases or when supplier dependency is low, as is the case here.
When might a buyer decide to use a distributive approach to a negotiation with a supplier?
- A . When they are dependent on that supplier in the future
- B . When there are various suppliers in the market producing a similar product
- C . When procuring an item that is not strategic to the organisation
- D . When a working relationship is important in the future
B
Explanation:
A distributive approach is appropriate when multiple suppliers offer similar products, as this competitive environment allows the buyer to focus on maximizing their position rather than building long-term partnerships. CIPS suggests that a distributive or competitive approach is best used in non-critical purchases or when supplier dependency is low, as is the case here.
When might a buyer decide to use a distributive approach to a negotiation with a supplier?
- A . When they are dependent on that supplier in the future
- B . When there are various suppliers in the market producing a similar product
- C . When procuring an item that is not strategic to the organisation
- D . When a working relationship is important in the future
B
Explanation:
A distributive approach is appropriate when multiple suppliers offer similar products, as this competitive environment allows the buyer to focus on maximizing their position rather than building long-term partnerships. CIPS suggests that a distributive or competitive approach is best used in non-critical purchases or when supplier dependency is low, as is the case here.
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
- A . Persistent late payment of the supplier’s invoices
- B . Unequal sharing of gains, risks, and costs with the supplier
- C . Requesting early supplier involvement
- D . Planning scheduled visits to the supplier site
- E . Scheduling agreed supplier delivery dates
A, B
Explanation:
Persistent late payment of the supplier’s invoices (A) and Unequal sharing of gains, risks, and costs with the supplier (B) are potential sources of conflict as they create dissatisfaction and imbalance in the relationship.
According to CIPS materials:
Late payments (A) can strain the supplier’s cash flow, affecting their operational stability and leading to mistrust in the buyer.
Unequal sharing of gains, risks, and costs (B) can result in one party feeling exploited or unfairly treated, which undermines the collaborative spirit essential for long-term partnerships.
In contrast, requesting early supplier involvement, planning visits, or setting delivery dates are typically part of constructive relationship management practices and do not inherently lead to conflict.
Fast & Easy Limited, a global fast food retailer, is in a negotiation with its major meat supplier. The supplier is asking for a 2% price increase, which Fast & Easy is strongly resisting. The supplier justifies this increase by stating that currency fluctuations, an unstable economic climate, and rising transport costs have necessitated this increase.
Which influencing tactic is the supplier using?
- A . Rational persuasion
- B . Inspirational appeal
- C . Coalition
- D . Personal appeal
A
Explanation:
This question is a duplicate of Question 22, and the answer remains Rational persuasion (A). The supplier’s use of economic justifications aligns with rational persuasion, an influencing tactic defined by CIPS as presenting logical, fact-based reasons to secure agreement.