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CIPS L4M7 Exam is divided into two parts. The first part is a multiple-choice exam that tests the candidate's knowledge of asset management principles and practices. The second part is a written exam that assesses the candidate's ability to apply these principles and practices to real-life scenarios. Both parts of the exam are challenging and require candidates to have a deep understanding of the subject matter.

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CIPS Whole Life Asset Management Sample Questions (Q121-Q126):

NEW QUESTION # 121
A procurement professional is working with a colleague from finance because the organization has been spending more money recently on inventory items. This is impacting the organization's working capital. In particular, they are concerned that average inventory levels have increased significantly year-on-year. Which of the following should they calculate to help in their investigation?

A. Age of receivables
B. Profit margin
C. Cash flow forecast
D. Rate of stock turn

Answer: D

Explanation:
The rate of stock turn (inventory turnover ratio) measures how often inventory is sold and replaced over a period. A lower turnover ratio indicates that inventory is sitting longer, tying up working capital. Calculating this rate helps procurement and finance assess inventory management efficiency, a key focus in whole-life asset management for optimizing working capital and reducing holding costs.

NEW QUESTION # 122
A company has obsolete inventories and it must write off these inventories. How does writing off inventories impact on the company's financial statements?
1. Stock increases
2. Stock decreases
3. Profit increases
4. Profit decreases

A. 2 and 4 only
B. 1 and 3 only
C. 1 and 4 only
D. 2 and 3 only

Answer: A

Explanation:
An inventory write-off is a process of removing from the general ledger any inventory that has no value.
Using the direct write-off method, a business will record a credit to the inventory asset account and a debit to the expense account. For example, say a company with $100,000 worth of inventory decides to write off $10,000 in inventory at the end of the year. First, the firm will credit the inventory account with the value of the write-off to reduce the balance. The value of the gross inventory will be reduced as such: $100,000 - $10,000 = $90,000. Next, the inventory write-off expense account will be increased with a debit to reflect the loss.
The expense account is reflected in the income statement, reducing the firm's net income and thus its retained earnings. A decrease in retained earnings translates into a corresponding decrease in the shareholders' equity section of the balance sheet.
If the inventory write-off is immaterial, a business will often charge the inventory write-off to the cost of goods sold (COGS) account. The problem with charging the amount to the COGS account is that it distorts the gross margin of the business, as there is no corresponding revenue entered for the sale of the product. Most inventory write-offs are small, annual expenses. A large inventory write-off (such as one caused by a warehouse fire) may be categorized as a non-recurring loss.
Reference:
- CIPS study guide page 86-90
- Inventory Write-Off
LO 2, AC 2.1

NEW QUESTION # 123
Which of the following best describes the term 'periodic review'?

A. Items are reviewed and orders placed depending on requirements
B. Items are reviewed as part of an imprest system
C. Items are reviewed when the price is at its lowest
D. Items are reviewed when the Kanban is triggered

Answer: B

Explanation:
Fixed-Time Period System (or Periodic Review system) is the inventory management system in which inventory is checked in fixed time periods, T, and the quantity ordered varies.
The imprest system is a form of financial accounting system. The most common imprest system is the petty cash system. The base characteristic of an imprest system is that a fixed amount is re-served, which after a certain period of time or when circumstances require, because money was spent, it will be replenished.
So the correct answer should be "Items are reviewed as part of an imprest system" LO 2, AC 2.3

NEW QUESTION # 124
A procurement manager has been asked to justify the purchase of a large piece of capital equipment valued at
£500,000 to internal stakeholders. The procurement manager decided to prepare the justification using a comprehensive formal business case due to the value of the purchase. Were they correct in doing this?

A. No, as the senior management would be able to make a decision on the proposed investment with little or no financial justification as they would be better placed to judge the requirement
B. No, as the procurement manager can always make the decision to purchase the asset on their own without any involvement or permission from the senior management team
C. Yes, as the procurement manager should undertake a comprehensive formal business case justification whatever the value of the purchase is likely to be
D. Yes, as the value of the proposed purchase is substantial and would require a significant capital investment by the organisation and approval of the senior management team

Answer: D

NEW QUESTION # 125
In inventory management, the cost of insurance and taxes are included in which group?

A. Inventory carrying cost
B. Set up costs
C. Costs of shortage
D. Acquisition costs

Answer: A

Explanation:
Direct and indirect costs of holding inventory include the following:
1. Acquisition costs
2. Holding costs (carrying costs) are the costs associated with the storage and handling of physical stock. There are two different types of holding costs:
a. Costs related to the value of the goods: financial costs (i.e. the interest on the working capital tied up in inventory, which may be the bank borrowing rate or the company's target for return on capital); cost of insurance; losses due to product deterioration; losses due to obsolescence and redundancy of inventory; losses due to theft, accidental damage etc.
b. Costs related to the physical characteristics of the inventory include the following: storage space; power, heat and lighting of the store; movement equipment; labour costs; administration costs.
3. Costs of stockouts
Reference:
LO 2, AC 2.2

NEW QUESTION # 126
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100% Pass Quiz The Best CIPS - Valid Exam L4M7 Registration

How Can CIPS L4M7 Exam Questions Assist You In Exam Preparation?

CIPS Whole Life Asset Management Sample Questions (Q121-Q126):