CIPS Exam L4M5 Topic 4 Question 11 Discussion

Actual exam question for CIPS's L4M5 exam

Question #: 11
Topic #: 4

Understanding supplier's mark-up and margin can provide procurement professional a comprehensive insight into supplier's net profits. Is this statement true?

AYes, because supplier's mark-up and margin are two most valuable sources of information to procurement

BNo, because mark-up and margin inform little about supplier's net profit

CNo, because margin is enough to tell procurement about supplier's profitability

DYes, because these are two indicators of supplier's future prospect

Show Suggested Answer

Suggested Answer: B

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

by Ceola at May 03, 2022, 10:46 AM

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