Question 1

When should a company use redundancy to implement change? Answer Options:

Accepted Answer

C

Explanation: Redundancy is a strategic tool for cultural change (p.208). Options A & B relate to cost-cutting and downsizing, not change. Option D involves expansion, not workforce reduction. [P.208]

Question 2

Jane works at a manufacturing organisation based in Europe. The organisation has recently decided
to open a new factory in a South-East Asian country and Jane is to head up the project to launch the
new factory. She has decided to fly out to the new site ahead of opening to do some research into
the local culture and assess how the differences in culture may impact upon the company as a whole.
The CFO of Jane's company thinks that this is a bad idea and a waste of money. Should Jane go?

Accepted Answer

A

Explanation: Understanding the local culture is crucial for integrating the new factory and ensuring the project's success.

Question 3

When is the best time to define acceptance criteria for a project? Answer Options:

Accepted Answer

C

Explanation: Acceptance Criteria should be set before the project starts in the Project Initiation Document (PID) (p.137). Option A is too late, as the project is already completed. Option B is iterative, but criteria should be predefined. Option D is for evaluation, not definition. [P.137]

Question 4

Jerry is responsible for starting a new construction project.
His company wants to build a new Water Park on the outskirts of town.
He has prepared a Statement of Need, outlining requirements and benefits.
Senior Management has approved the project to move forward.
Q: What should be Jerry's next task?
Answer Options:

Accepted Answer

B

Explanation: The next stage after a business justification is a Feasibility Study (p.18-19). This assesses financial viability and risks before moving forward. Concept design and project brief come after feasibility, and the construction manager is appointed much later in the process. [P.18-19]

Question 5

Scenario (same as Question 16): Fin Inc is working with the new client. What type of costing system is being used?

Accepted Answer

A

Explanation: An open book costing system involves sharing financial details transparently between the parties.

Question 6

When is a cost-plus pricing arrangement most likely to be used? Answer Options:

Accepted Answer

C

Explanation: Cost-plus pricing is best suited for high-risk environments (p.93), such as fluctuating commodity markets. It reduces risk for suppliers by allowing cost adjustments based on actual expenses plus a margin. Option A is incorrect because low-risk projects favor fixed pricing. [P.93]

Question 7

What is the purpose of a Project Audit? Answer Options:

Accepted Answer

D

Explanation: A Project Audit (p.141) occurs post-completion to assess: Financial health Performance evaluation Lessons learned It is not a planning tool (Option B), nor is it for active budget management (A) or solely for senior leadership (C). [P.141]

Question 8

A local library is contracting a construction firm to design and build a new extension using a target
costing method. Which of the following statements are true about this pricing mechanism? Select all
that apply

Accepted Answer

B

Explanation: Target costing requires a collaborative relationship between the client and contractor. The other options do not accurately describe the target costing approach.

Question 9

Why would a company use a discounted cash flow in calculating an Investment Appraisal? Select all that apply

Accepted Answer

D, E

Explanation: Discounted cash flow accounts for the time value of money and allows for an accurate comparison of projects with different durations.

Question 10

Which of the following is an advantage to the contractor in an EPC contract arrangement?
EPC contracts provide several benefits to contractors, such as clear project scope, reduced risks, and
better project management.
Answer Options:

Accepted Answer

A

Explanation: The correct answer is 1 (p.13). The scope is clearly defined by the client, making it easier for the contractor to plan and execute the project efficiently. Option 2 is incorrect because not all EPC contracts offer an early completion bonus. Option 3 is incorrect because EPC contracts can include subcontractors. Option 4 is incorrect because risks are shared between the client and contractor. [P.13]

Question 11

According to Hofstede's Cultural Dimensions, Individualism is when a person prioritises themselves over a group. Is this correct?

Accepted Answer

B

Explanation: Hofstede's dimension contrasts individualism with collectivism. In individualistic cultures, the individual is prioritised over the group.

Question 12

Mustard Ltd contracted Red Ltd for IT services, requiring 98% internet connectivity.
Red Ltd has only achieved 90% connectivity despite multiple meetings.
Mustard Ltd now seeks to terminate the contract.
Q: Can Mustard Ltd terminate the contract?
Answer Options:

Accepted Answer

D

Explanation: Connectivity is listed as a warranty, not a condition (p.125). Warranty breaches allow for damages but do not permit contract termination. If it were a "condition" instead of a warranty, termination would be allowed. [P.125]

Question 13

In a fixed lump sum contract, this pricing mechanism does not allow for any changes in price. Is this
statement TRUE?
Fixed lump sum contracts are widely used in construction and infrastructure projects.
Answer Options:

Accepted Answer

D

Explanation: Fixed Lump Sum contracts allow limited price changes under specific conditions (p.55), such as client variation requests, force majeure, or inflation adjustments. Firm Fixed Price contracts, however, do not allow any changes. [P.55]

Question 14

Skipped Which of the following statements is true of a business that operates in a 'low-context culture' country?

Accepted Answer

C

Explanation: Communication is direct and meetings are therefore shorter. This is from p. 182: "In low-context cultures, communication is much more direct and explicit, which can result in shorter meetings and a reliance on rules to govern procedures." CIPS gives the UK and USA as examples of a low-context culture. Domain: 3.2

Question 15

Liability limitation often focuses on which of the following types of loss, which is said to be the most unpredictable and most significant in the case of a default on a contract?

Accepted Answer

D

Explanation: Consequential loss is considered the most unpredictable and significant, hence it is often the focus of liability limitations.

Free CIPS L6M5 Actual Exam Questions