Pass the CIPS CIPS Level 4 Diploma in Procurement and Supply L4M7 Questions and answers with CertsForce

Explanation

There are two main processes of recycling – open loop recycling and closed loop recycling.

Open Loop Recycling

Open loop recycling is a method that delays disposal by converting manufactured goods and spent materials into both new raw materials, which can be used for a manufacturing purpose, as a fuel source for a different manufacturing process and waste products.

Typically, materials recycled through open-loop recycling will be used for purposes different from their original purpose.

This means that the input into the recycling process is converted to a new raw material, which can be used as an input into another manufacturing process.

Materials in an open loop recycling process are treated using various forms of treatment including heat, chemical reactions, or physical crushing.

Closed Loop Recycling

Closed loop recycling is a process where waste is collected, recycled and then used again to make the same product it came from. This process is restorative and regenerative by design and aims to keep materials at their highest utility and value always.

Closed loop recycling is focused on resource sustainability, which means that recycling of a material can be done indefinitely without degradation of properties. In this case, conversion of the used product back to raw material allows repeated making of the same product, which helps hazardous waste generators reduce carbon footprint and achieve corporate sustainability initiatives.

Closed-loop recycling is common in specialized industries, such as the computer and battery industries, which use expensive or complex goods that cannot easily be broken down post-consumption into constituent materials.

A prime example of a closed-loop recycling process is the recycling of aluminum cans. Aluminum can be recycled to form new cans with little material degradation or waste creation.

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

Explanation

Assets in their end of life need to be removed or disposed. Though an organisation can incur some costs in decommissioning or removal of the assets, it may recover costs by reselling the assets. Therefore, sometimes the organisation can gain positive cash flow from removal and disposal of assets. The answer should be "No, the organisation may recover the value of the assets by reselling it".

LO 3, AC 3.3

Explanation

Materials that will not easily deteriorate, are generally stored in open or fairly covered areas (stockyard). The materials are usually in bulk, like steel plates or coils casting, timber coal, steel barrels, cable drums, piping, lampposts, lorries, etc.

Stockyards are open or semi-covered areas that are used for the following:

- Bulk loose or packaged materials

- Bulky or oversized items that may be difficult to move inside

- Materials that may require specialised handling, loading or unloading

Below image shows the example of a stockyard that stores loose coal and its handling system.

LO 1, AC 1.1

Explanation

Scheduled maintenance is any repair and upkeep work performed within a set timeframe. It details when given maintenance tasks are performed and by whom. Scheduled maintenance may occur at repeating intervals or in response to a work request.

"Overhauling of machine" means that the machine is regularly checked and corrupted parts are replaced if needed.

"Cleaning of tank" and "Oil changes" also occur at time intervals as scheduled

So the correct answer is "Repair signage damage from a recent storm"

Explanation

The concept of a unit load is to create a stable and secure, easy-to-move group of stock that is fast to load and unload from vehicles.

The advantages of unit load concepts are as the following:

• More items can be handled at the same time, thereby reducing the number of trips required and, potentially, reducing handling costs, loading and unloading times, and product damage.

• Enables the use of standardized material handling equipment.

Just-in-Time (JIT) aims to:

Improve quality by ensuring defect-free products that meet customer expectations.

Reduce inventory levels: The JIT approach minimizes holding costs by producing and delivering goods as needed.

Whole-life asset management values JIT for optimizing inventory control, reducing waste, and enhancing quality while keeping storage costs minimal.