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ACCA Applied Knowledge · Management Accounting · Sources of data

A company spends $4,000 a month producing a detailed variance report. A manager estimates that using the report leads to savings of $3,200 a month. Which characteristic of good information is MOST directly breached?

The report is not cost-effective. It costs $4,000 a month to produce but yields only $3,200 of benefit, a net loss of $800 a month. Good information should provide benefits that exceed the cost of producing it.

  1. AThe information is not accurate
  2. BThe information is not understandable
  3. CThe information is not cost-effectiveCorrect
  4. DThe information is not timely

Explanation

Information should be worth more than it costs to produce. Here the cost is $4,000 and the benefit is $3,200, so the net result is a loss of $800 per month. This breaches the cost-benefit principle. Nothing in the data suggests problems with accuracy, clarity or timing.

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