Free Online CIPS L6M5 Practice Test

Golden Rainbow Ltd has invested £4m in a new research project which was started three years ago. The CFO has calculated that the average rate of return on the project is -6%. Is this possible?

XYZ is a large construction organisation which is currently running five different projects. Below are details of each project including the type of contract and pricing mechanism used.

Project 1: This project is to build an apartment block and the company has responsibility for designing and constructing the building. Upon completion, ownership will pass to the client. Management have decided the pricing based on past experience of similar projects.

Project 2: The company will provide the facilities management to the building for 6 years following the completion of the construction work. Due to volatility in the industry, the budget is changing continuously over the years.

Project 3: XYZ has been involved in the project since an early stage, but does not hold the design risk for the construction of the building. The budget starts afresh at the beginning of each new accounting period.

Project 4: XYZ is responsible for the design and build of certain aspects of the construction. However, the client has also employed another company for other aspects. The client will take ownership from all companies involved upon completion. XYZ is paid when milestones are completed during the building phase.

Project 5: This is the construction of a new toll bridge which will be operated by XYZ for the first 6 years post construction. Pricing is based on the costs of raw materials and labour and a profit is added on top of this.

Complete the table below by listing the type of contract and pricing mechanism being used for each project; design and operate, design build operate and ownership, public private partnership, full turnkey, partial turnkey, management contracting, bottom up, top down, rolling, fixed fee, zero, activity.

Which of the following will you put into box 10?

KCJ Ltd is a public sector organisation which is looking to run 5 projects over the next financial year. Below are details of each project:

Project 1: The budget estimate of this project is calculated using an algorithm. The project lead is the founder of the organisation.

Project 2: The project lead is the Head of Research and Development, who has a PHD in Data Science. He has taken costing and budget information from similar projects conducted previously to decide on a budget for Project 2.

Project 3: The project is being led by a key stakeholder and involves creating a Bill of Materials. Costs will be worked out for each item required to complete the project and totalled together.

Project 4: The Project Leader has worked out the base cost, most likely cost and worst-case scenario for the project. His power comes from his ability to pull the plug on this project at any time.

Project 5: This project is being led by a well-liked member of the Board of Directors. He has selected a team who he gets on well with and has decided the budget based on his own research.

For each project, select the cost estimation method used and the source of power of the Project Leader. Complete the table below, some answers may be used twice: bottom up, 3-point estimate, parametric, analogous, expert judgement, top-down, positional (x2), personal (x2), expert, negative

Which of the following will you put into box 4?

Below are descriptions of five companies located in the UK:

Company 1: This company has a highly centred authority around the founder. The culture is characterised by strict financial systems and a reward/ bonus scheme for meeting targets.

Company 2: People who work here see themselves as individuals and often bring in their own clients. There is strong branding and corporate identity including the use of a strict colour palette.

Company 3: A person’s salary and job title is decided by a strict hierarchy structure. The organisation is often described as bureaucratic and has stringent rules about who can do what.

Company 4: Employees often work individually or in small teams to complete projects as they arise. There is a strong emphasis on Monday Morning Meetings where each person/ team will describe what they are working on for the upcoming week.

Company 5: Authority is held by a small group of senior people who make all the decisions. There are few rules, and culture is reinforced by people talking about past successes.

For each company, select the type of culture at each as well as the most relevant cultural web influence. Note some answers may be used twice. Power (x2), Role (x2), Person, Task, Symbols, Organisation Structure, Control System, Stories, Ritual, Power Structure.

Which of the following will you put into box 1?

Glitter Kitten Ltd is a leading manufacturer of cat food and is currently looking into expanding its operations into new markets. The CEO has committed to providing the funds for expansion and he has commissioned a financial appraisal of two different options. The Senior Leadership team are currently reviewing the Net Present Values of each option.

The CEO is getting frustrated with the length of time the Senior Leadership are taking in their appraisals so has done a quick analysis using the payback method. The second option, to expand into making dog food, produced the best results, which are based on an estimated total outflow of £50m and annual inflows of £10m.

The CEO is also looking into methods for improving current products. He has assembled a Project Team of researchers who is looking into their current range of cat food, taking particular notice of customer opinions and reviews. The goal is to, based on this research, investigate opportunities within the supply chain to enhance the quality of the product, as well as potentially reducing the costs of manufacturing.

Raw materials for Glitter Kitten’s most popular cat food will soon be provided by Paw Ltd who is a new supplier. The contract is still under negotiation and is expected to last for the next 3 years. The CEO is keen to have visibility over Paw Ltd’s costs and profit margin.

5. Which of the following pricing mechanisms is most suitable for use with Paw Ltd?