New CIPS L4M7 Dumps & Questions Updated on 2026
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NEW QUESTION # 83
When accounting for the disposal of fixed assets, the gain or loss on disposal is equal to...?
- A. The difference between resale price and the cost or valuation plus depreciation up to the beginning of the year in which disposal took place
- B. The difference between resale price and the cost of that asset
- C. The difference between resale price and the cost of the asset less depreciation up to the beginning of the year in which disposal took place
- D. The difference between resale price and the cost or valuation less accumulated depre-ciation up to the date of disposal
Answer: C
Explanation:
Fixed assets may be sold anytime during their useful life. This gives rise to the need to derecognize the asset from balance sheet and recognize any resulting gain or loss in the income statement.
The accounting for disposal of fixed assets can be summarized as follows:
- Record cash receive or the receivable created from the sale:
Debit Cash/Receivable
- Remove the asset from the balance sheet
Credit Fixed Asset (Net Book Value)
- Recognize the resulting gain or loss
Debit/Credit Gain or Loss (Income Statement)
Example
ABC LTD purchased a machine for $2000 on 1st January 2001 which had a useful life of 5 years and an estimated residual value of $500. The machine was being depreciated on straight line basis. However, ABC LTD decided to sell the asset on1 January 2003 for $1500 in order to raise cash for the purchase of a new machine.
The disposal of the fixed asset will be recorded as follows:
Record cash received or the receivable arising from the sale:
Debit Cash $1,500
Remove the asset from the balance sheet
As a fixed asset is recognized in the balance sheet at the Net Book Value (i.e. Cost less Accumulated Depreciation), the machine will be removed from the accounts of ABC LTD in two parts:
First, the Machine Cost must be removed by crediting the ledger:
Credit Machine Cost $2,500
Second, the Accumulated Depreciation in respect of the machine must be removed by debiting the ledger:
Debit Accumalated Depreciation $600*
*Accumulated Depreciation: (2000 - 500)/5 x 2 Years
The combined effect of the above two transactions would be to remove the machine's net book value of $1400 (2000 - 600) from the balance sheet.
Recognize the resulting gain or loss on the sale of machine
ABC LTD received $1500 for an asset with a balance sheet worth of $1400. It therefore earned a gain of
$100. The gain will be recorded as follows:
Credit Gain on Disposal $100
Reference:
- Accounting for Disposals
- CIPS study guide page 197-198
LO 3, AC 3.3
NEW QUESTION # 84
MRP system is the most suitable IT system to manage which type of items?
- A. Independent demand
- B. Dependent demand
- C. Construction projects
- D. Fast moving components
Answer: B
Explanation:
Material requirement planning (MRP) is a production planning and material (inventory) control system used in manufacturing. Objectives of MRP are to ensure materials are available for production while minimising inventory and to plan production and procurement activities.
Bill of materials (BOM) is an important component of MRP. BOM is also known as product struc-turer. This lists all the items that comprise each assembly and sub-assembly that make up the final product or end item. Therefore, MRP is commonly used to manage dependent demand stock.
Reference:
LO 2, AC 2.3
NEW QUESTION # 85
When considering the purchase of a capital asset, there are a number of factors to consider. These include cost of operation, spares, disposal and reuse. Which other factors could be considered?
1. Who owns the equipment
2. Compatibility with existing equipment
3. Contribution to turnover
4. Cost of maintenance
- A. 1 and 3 only
- B. 2 and 4 only
- C. 3 and 4 only
- D. 1 and 44 only
Answer: B
NEW QUESTION # 86
Objective forecasting techniques must be based on which of the following?
1. Opinions
2. Figures
3. Facts
4. Jugdement
- A. 2 and 3 only
- B. 1 and 4 only
- C. 3 and 4 only
- D. 1 and 2 only
Answer: A
Explanation:
Subjective forecasting uses qualitative methods (surveys, opinions) which relay on perception and opinion. Objective forecasting uses quantitative methods (facts and figures). Both methods have to make assumption about how closely (or not) the future will resemble the present and the past. Forecasting is never exact.
Reference:
LO 2, AC 2.3
NEW QUESTION # 87
Which of the following is the Japanese word for 'billboard' or 'signboard'?
- A. Kanban
- B. Kaizen
- C. Muda
- D. Poka-Yoke
Answer: A
Explanation:
Kanban (##) (signboard or billboard in Japanese) is a scheduling system for lean manufacturing and just-in- time manufacturing (JIT).
Poka-yoke (####, [poka yoke]) is a Japanese term that means "mistake-proofing" or "inadvertent error prevention". A poka-yoke is any mechanism in any process that helps an equipment operator avoid (yokeru) mistakes (poka). Its purpose is to eliminate product defects by preventing, correcting, or drawing attention to human errors as they occur.
Kaizen is a concept referring to business activities that continuously improve all functions and involve all employees from the CEO to the assembly line workers. Kaizen (##) is the Sino-Japanese word for
"improvement". Kaizen also applies to processes, such as purchasing and logis-tics, that cross organizational boundaries into the supply chain.
Muda (##, on'yomi reading) is a Japanese word meaning "futility; uselessness; wastefulness", and is a key concept in lean process thinking, like the Toyota Production System (TPS) as one of the three types of deviation from optimal allocation of resources (the others being mura and muri). Waste reduction is an effective way to increase profitability.
NEW QUESTION # 88
Decommissioning, removal and disposal of assets may have impact on the environment. An organisation should have policies and procedures in place to enhance its environmental performance. Which standard family provides the guidance on environmental policies and procedures?
- A. ISO 22000 family
- B. ISO 14000 family
- C. ISO 9000 family
- D. ISO 27000 family
Answer: B
Explanation:
The ISO 14000 family of standards are developed by ISO Technical Committee ISO/TC 207 and its various subcommittees. For a full list of published standards in the series see their standards catalogue. ISO 14001 provides requirements with guidance for use that relate to environmental systems. Other standards in the family focus on specific approaches such as audits, communications, labelling and life cycle analysis, as well as environmental challenges such as climate change.
ISO 27000 family of standards concerns information technology, with the goal of improving security and protecting company assets. Started in 2005, the two most popular standards are ISO 27001:2013 and 27002:
2013. 27001 is management-based system, whereas 27002 is a technical document, focused on the individual and putting a code of conduct in place. Organizations can choose either standard; ISO 27001 has over 22,000 certifications worldwide. It is a broad standard, and for this reason the certification can be customized to fit the needs of the organization, and is not mandatory.
ISO 22000 sets out the requirements for a food safety management system and can be certified to it. It maps out what an organization needs to do to demonstrate its ability to control food safety hazards in order to ensure that food is safe. It can be used by any organization regardless of its size or position in the food chain.
ISO 9001 is a family of quality management standards, there are fourteen in total. Of these, ISO 9001:2015 is the only one that can be certified to. It was first published in 1987, and has since been updated about every 7 years. The standard details how to put a Quality Management System (QMS) in place to better prepare your organization to produce quality products and services. It is customerfocused, and places an emphasis on continuous improvement and top management processes that extended throughout the organization.
NEW QUESTION # 89
Holding inventory is key to ensure that an organisation can maintain production and meet customer demands.
Which of the following are classes of inventory? SelectTHREEthat apply.
- A. Machines
- B. Sub-assemblies
- C. Scrap components
- D. Raw material
- E. Forklift trucks
- F. Finished products
Answer: B,D,F
NEW QUESTION # 90
"Open stock plus purchases minus closing stock" is the formula of which of the following?
- A. Cost of goods sold
- B. Liability
- C. Inventory
- D. Revenue
Answer: A
Explanation:
The amount of closing stock (properly valued) is used to arrive at the cost of goods sold in a periodic inventory system with the following calculation:
Opening stock + Purchases - Closing stock = Cost of goods sold
NEW QUESTION # 91
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. 1 and 3 only
- B. 2 and 4 only
- C. 1 and 4 only
- D. 2 and 3 only
Answer: B
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 # 92
A piece of machinery has reached the end of its manufacturing life cycle and is due to be disposed of. What is the process that must take place for this to occur?
- A. Whole-life costing
- B. Commissioning
- C. Inventory management
- D. Decommissioning
Answer: D
Explanation:
Decommissioning is the process of safely retiring equipment from use. It involves steps such as cleaning, dismantling, and responsibly disposing of the asset, especially if it contains hazardous materials. Whole-life asset management includes decommissioning as a key phase, ensuring that assets are disposed of cost- effectively and in compliance with environmental standards.
NEW QUESTION # 93
What is the difference between fixed and variable costs?
- A. Fixed costs include items such as labour overtime and direct materials while variable costs do not
- B. Fixed costs do not vary with the volume of business. Variable costs do vary with the volume of business
- C. Fixed costs do vary with the volume of business Variable costs do not vary with the volume of business
- D. Variable costs include items such as building rental and insurance costs while fixed costs do not
Answer: B
NEW QUESTION # 94
An organisation may incur additional costs in stockout events. Which of the following is an exam-ple of costs of inventory stockouts?
- A. The return forgone by investing capital in inventory rather than elsewhere
- B. The lost contribution margin on sales forgone as a result of customer dissatisfaction due to unavailability of goods
- C. The costs of obsolescence and costs of insurance that change with the quantity of in-ventory held
- D. The costs of storage space owned that cannot be used for other profitable purposes when inventories decrease
Answer: B
Explanation:
Stockout is a situation where an inventory item is not available when required. The costs associated with a stockout include the following:
- Lost of production output - there will be no production until the stockout is resolved (new stock is acquired).
For factory operating 24/7 with no spare capacity, this lost output will not be able to be recovered.
- Costs of machine downtime and of overhead spread over a reduced level of output
- Costs of any action required to deal with the stockout...
- Loss of customer goodwill through inability to supply or late delivery
- Loss of sales or new orders
- Loss of market creditability
Reference: CIPS study guide page 101-102
LO 2, AC 2.2
NEW QUESTION # 95
Which of the following is NOT an improvement available in ERP II in compare with ERP?
- A. ERP II systems are closed and silo-working
- B. ERP II crosses all sectors and segments of business, including service, government and asset-based industries
- C. ERP II enables the organisation to collaborate with trading partners across the supply chain
- D. ERP II offers better integration with other proprietary software
Answer: A
Explanation:
The main improvements from ERP to ERP II are the following:
- ERP II is web enabled as compared to Conventional ERP Which is not.
- ERP is restricted to provide selected exhaustive or rigorous or wide-spread coverage in its mod-ules. But as compared to ERP, ERP II provides the true and accurate blend of the macro and the micro and affords customers with curative actions/measures after identifying the slip-up/error or fault;
- ERP was embattled more headed for manufacturing or industrialization and the dilemma or difficulty is conquer in ERP II by endowing clarification for all kind of industries and sectors.
- ERP is not in the position or could not possibly integrate/incorporate diverse functions from di-verse departments/divisions but ERP II could possibly do so as well as from different industries as compared to conventional ERP.
- For WEB and WAP connectivity ERP II grip CRM and SCM Functionalities.
- ERP II be obliged the function and purpose to an external/outdoor one and smooth the progress of better networks than remaining as internal/interior application.
NEW QUESTION # 96
For which of the following is the 'delphi method' used?
- A. Controlling products
- B. Classifying products
- C. Forecasting demand
- D. Valuing stock
Answer: C
Explanation:
Delphi method is a structured forecasting technique using a panel of experts and a number of rounds of questioning. Responses are shared after each round and the experts encouraged to recon-sider their own responses. It is intended to achieve a consensus view.
Reference:
LO 2, AC 2.3
NEW QUESTION # 97
Extra units that are held in inventory to reduce the risks of stock-out are called...?
- A. Just-in-time
- B. Demand variance
- C. Safety stock
- D. Reorder point
Answer: C
Explanation:
The safety stock (or buffer stock) is the stock level that limits stock shortages due to unforeseen events (forecasts not in line with demand, longer than expected supply time, etc...) Demand variance is the degree to which the demand in a fixed period deviates from the average demand of the same period.
A reorder point is the unit quantity on hand that triggers the purchase of a predetermined amount of replenishment inventory.
The just-in-time (JIT) inventory system is a management strategy that aligns raw-material orders from suppliers directly with production schedules.
NEW QUESTION # 98
Can RFID tags work when they are attached to metal surfaces or embedded within metal products?
- A. Yes, some technologies allow RFID tags to work on metal or within metal products
- B. No, RFID tags only work with plastic products
- C. Yes, all RFID tags can be used in every environmental conditions
- D. No, metal surface reflects the radio wave and thus interferes the operations of RFID tags
Answer: A
Explanation:
Mounting or embedding RFID tags on metal can be tricky. Metal surfaces reflect energy emitted from RFID readers and create interference for RFID tag antennas, which means the tag isn't able to receive power and transmit information; however, specific RFID tags will work around metal sur-faces. RFID companies have patented technology that allows RFID to work when attached to metal surfaces and even embedded within metal products. As long as you choose the correct RFID equipment for your environment and application, you won't need to worry about interference from metal.
Reference: CIPS study guide page 49-50
LO 1, AC 1.2
NEW QUESTION # 99
XYZ Ltd is a major distributor of electrical equipment protection products in the United States. XYZ found that there was a lack of communication between the company and its key supplier, leading to the supplier trying to predict distributor needs and distributor attempting to estimate lead times. Essentially, both the supplier and the distributor have different sets of information, spending time and money trying to predict what the other will do. To deal with this problem, XYZ Ltd decides to implement new inventory management method in which the supplier manage the replenishment of items for sale. Both parties are obliged to share information on variations in demand and stock levels for goods used for or sale. Which inventory management method is XYZ Ltd implementing?
- A. Vendor managed inventory
- B. Floor-ready merchandise
- C. Economic order quantity
- D. Reverse logistics
Answer: A
Explanation:
Floor-Ready Merchandise can be defined as the merchandise that is pre-tagged, pre ticketed and pre-occupied with all the necessary details and information such as marked to their specifications for style, size, type, color and price, this information is required in the retail store and is done before it reaches the retail store.
Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W.
Harris and has been refined over time. The formula assumes that demand, ordering, and holding costs all remain constant.
The full definition of reverse logistics, as according to The Council of Logistics Management, is the process of implementing, controlling, and planning the cost-effective flow of finished goods, raw materials, and in-process inventory. The flow is from the point of consumption (i.e. the customer) to the point of origin (i.e. the manufacturer), to properly dispose of these or to recapture value.
In the scenario, XYZ solves the current situation by letting the supplier to management the inventory and sharing stock level information with the supplier. Vendor managed inventory is the most suitable answer.
Reference:
LO 3, AC 3.1
NEW QUESTION # 100
Do all types of warehouses require access to daylight to reduce the cost of electricity?
- A. Yes, because organisation's need for artificial lighting and heating will reduce
- B. No, because some types of stock are sensitive to sunlight
- C. Yes, because sunlight sterilises inventories in damp conditions
- D. No, because only ventilation can help to reduce the humidity in the warehouse
Answer: B
Explanation:
The design of a building should consider the advantages of natural light as this can reduce the cost of artificial lighting and improve the environmental performance of the building. Daylight entering the building can also help reduce heating costs. Unfortunately some stocks react badly to direct sunlight, and some stock reacts badly to extreme of temperature or may require a specific temperature for storage. Some stock may require a warmer temperature than the ambient temperature and other stocks may require cooler temperature. For example, fabric and garment are sensitive to direct sunlight as ultraviolet light catalyses a reaction between the water present in all fabrics and atmospheric oxygen to create hydrogen peroxide. This is a bleaching agent and breaks down the chemical bonds that give dyes their colour.
Reference:
LO 1, AC 1.1
NEW QUESTION # 101
A manufacturer has discovered that some of the stock in its storeroom is obsolete, and now wishes to take the appropriate action. Should the manufacturer write the stock off?
- A. No, it should be included with the closing stock
- B. Yes, this will increase the sales for the period
- C. No, the best approach would be to leave the stock where it is
- D. Yes, as it has no value it must be written off
Answer: D
Explanation:
Writing off obsolete stock is standard practice as it no longer holds any value for the organization. This allows for accurate financial reporting by removing items that cannot be sold or used from the balance sheet.
Including it in closing stock would misrepresent asset values, while leaving it unsorted wastes valuable space.
Whole-life asset management emphasizes disposal or recycling options to avoid holding costs for unused assets, reducing storage costs and improving warehouse efficiency.
NEW QUESTION # 102
Your company has established the number of new warehouses it requires and the locations it wishes to build them. The next step is to think about the structural design and capacity. There are different factors to consider in getting these things correct. Which of the following factors can influence the design of a new warehouse facility?
- A. Product pricing
- B. Profit margin
- C. Image of the company
- D. Space utilisation
Answer: D
NEW QUESTION # 103
Jack is the inventory manager of XYZ Ltd. a retail chain business operating in ten locations nationally. Jack is contemplating changing the inventory systems from barcoding to radio frequency identification otherwise referred to as RFID.
However, it Is unclear to Jack what the challenges this new system might present Which one of the following is a disadvantage of an RFID system?
- A. It only operates on clear barcodes and not ones that are faded or damaged
- B. It is labour intensive as it requires a direct line-of-sight to the product tags
- C. It can only be used on bulky metal products held in storage
- D. It can cause reader collision from two simultaneous tags in the same area
Answer: C
NEW QUESTION # 104
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CIPS L4M7 Exam is an advanced-level certification exam that is suitable for professionals who are involved in asset management, such as asset managers, facilities managers, real estate managers, and project managers. L4M7 exam covers a range of topics, including asset management principles, asset valuation, risk management, lifecycle costing, maintenance management, and disposal management. L4M7 exam is designed to test the candidates' understanding of these topics and their ability to apply them in real-world scenarios.
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