Free CIPS L3M1 Exam Actual Questions

The questions for L3M1 were last updated On Mar 28, 2025

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Question No. 1

'A - - - - - - - - is a price in which the supplier and buyer agree that the supplier can charge a price based on actual costs incurred, plus a margin for profit'.

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Correct Answer: D

This should be an easy QUESTION NO :. The definition describes nicely one possible form of cost-based price. It is important to try to be able to distinguish cost from price.

The 'target cost incentive' method of pricing might have been tempting as an answer, since the defi-nition shown mentions cost, but it mentions neither target nor incentive, and can therefore be ruled out.

And whole life cost is a different concept altogether.


Question No. 2

Which of the following are ways of classifying organisations? (select all that apply)

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Correct Answer: A, B, C, D

All of these are ways of classifying organisations.

Examples: Retailers, SMEs, limited companies, etc


Question No. 3

The Equality Act in the UK was introduced in which year?

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Correct Answer: C

The Act was introduced in 2010. Although this is a UK-centric QUESTION NO :, it is valid for several rea-sons. Firstly, the UK was one of the first countries to introduce such a wide-ranging Act; secondly the Act is so wide-ranging that all UK managers need to be familiar with it. People who live and work outside the UK may wish to familiarise themselves with the content of the Act to have an idea of what the impact of such legislation might be like.

Interestingly, in the UK, the Act has seldom been used 'in anger'.


Question No. 4

Thinking of Michael Porter's Industry Structure Analysis (commonly referred to as Five Forces Analysis), the content of the centre circle is about:

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Correct Answer: B

Competitive rivalry within an industry.

This can be quite an important point, and why I have such a dislike of the less formal title for the model - the model is about entire industries, not just about a single firm - this is commonly misun-derstood by students (and sadly, some tutors) - and the original Porter title - 'Industry Structure Analysis' - helps us understand that, I think. I find this tool of analysis to be very helpful in under-standing behaviour within sectors, despite criticism of the model and its age from some commenta-tors

The other answers shown are mere fictions.


Question No. 5

Which of the following constitute non-tariff barriers to trade?

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Correct Answer: B, D

Non-tariff barriers are restraints on international trade which are not so obvious as simple duties or tariffs. Complex procedures can slow things down, reducing the incentive to export to that country resulting in protected domestic business; subsidies to one's own producers make it more difficult for foreign firms to compete - again creating a barrier to trade.

Increased import duties would be a form of tariff (potentially in breach of GATT / WTO agree-ments); reduced import duties would free up / encourage trade.