CIPS L4M2 Defining Business Need
Test Practice 2026 Guide
1. Fixed Cost (FC) Costs that remain the same irrespective of business activity or volume
2. Variable Cost (VC) Costs that vary with the level of output
3. Market Factors Objectives
Drivers
Governance
Ownership
Commodity or Non-Commodity
4. Break-Even Point When total costs are equivalent to sales revenue (after this, it is profit)
(BEP)
5. Solving a Prob- SCAMPER
lem
Substitute
Combine
Adapt
Modify
Put to other uses
Eliminate
Reverse
6. 3 Stages of the 1. TCA
Priceberg 2. Maintenance
3. Disposal
7. Identifying Busi- Regulatory
ness Needs - Availability
RAQSCI Quality
Service Requirements
Cost
Innovation
1/9
, CIPS L4M2 Defining Business Need
Test Practice 2026 Guide
8. Direct Costs Directly associated with the production of a good or service e.g. a component
9. Indirect Costs General running costs/Overheads
Costs not easily attributed to specific goods or services e.g. electricity
10. Semi-Variable Made up of fixed and variable costs
Costs
11. An industry is de- A seller
fined by...
12. A market is de- A buyer
fined by...
13. Straight Re-Buy The purchase of an item that was purchased last time there was a need rather than
considering an alternative
E.g. Utilities, Raw Materials or Maintenance, Repair and Operational (MRO) items
14. Modified Re-Buy The purchase of an item that was purchased previously but with changes to the
specification or supplier
15. New Purchase The purchase of an item for the first time
16. Closed Problem These appear when something happens that should not have happened
17. Open-Ended These are where something is stopping the achievement of an objective or blocking
Problem progress
18. Solving a Prob- 5 Whys
lem
19. Return of Invest- A measure of profitability that indicates whether a gain or loss has been generated
ment compared with the initial cost
2/9
Test Practice 2026 Guide
1. Fixed Cost (FC) Costs that remain the same irrespective of business activity or volume
2. Variable Cost (VC) Costs that vary with the level of output
3. Market Factors Objectives
Drivers
Governance
Ownership
Commodity or Non-Commodity
4. Break-Even Point When total costs are equivalent to sales revenue (after this, it is profit)
(BEP)
5. Solving a Prob- SCAMPER
lem
Substitute
Combine
Adapt
Modify
Put to other uses
Eliminate
Reverse
6. 3 Stages of the 1. TCA
Priceberg 2. Maintenance
3. Disposal
7. Identifying Busi- Regulatory
ness Needs - Availability
RAQSCI Quality
Service Requirements
Cost
Innovation
1/9
, CIPS L4M2 Defining Business Need
Test Practice 2026 Guide
8. Direct Costs Directly associated with the production of a good or service e.g. a component
9. Indirect Costs General running costs/Overheads
Costs not easily attributed to specific goods or services e.g. electricity
10. Semi-Variable Made up of fixed and variable costs
Costs
11. An industry is de- A seller
fined by...
12. A market is de- A buyer
fined by...
13. Straight Re-Buy The purchase of an item that was purchased last time there was a need rather than
considering an alternative
E.g. Utilities, Raw Materials or Maintenance, Repair and Operational (MRO) items
14. Modified Re-Buy The purchase of an item that was purchased previously but with changes to the
specification or supplier
15. New Purchase The purchase of an item for the first time
16. Closed Problem These appear when something happens that should not have happened
17. Open-Ended These are where something is stopping the achievement of an objective or blocking
Problem progress
18. Solving a Prob- 5 Whys
lem
19. Return of Invest- A measure of profitability that indicates whether a gain or loss has been generated
ment compared with the initial cost
2/9
