ACCA Applied Knowledge · Management Accounting · Cost reductions and value enhancement
A manufacturer reviews an existing product that has been in production for several years, examining each component and function to remove unnecessary cost without reducing the quality or performance the customer expects. Which technique is being applied?
The technique is value analysis. It reviews an existing product's components and functions to remove unnecessary cost while keeping the performance customers expect. Value engineering is similar but is applied at the design stage, before the product goes into production.
- AValue analysisCorrect
- BValue engineering
- CLife cycle costing
- DBackflush costing
Explanation
Value analysis is a cost reduction technique applied to existing products, examining their functions and components to eliminate unnecessary cost while keeping the required function. Value engineering is the same thinking applied at the design stage before production starts, so it does not fit an existing product.
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