ACCA Applied Knowledge · Business and Technology · The relationship between accounting and other business functions
A retailer's logistics manager reports that late supplier deliveries cause frequent stock-outs, so the management accountant proposes a review. Which action by the accountant best reflects the accounting function supporting operations?
The accountant should analyse the cost of stock-outs, including lost sales, against the cost of holding safety inventory. This gives operations decision-useful information. Cutting prices does not fix delivery problems, and altering depreciation merely manipulates reported profit.
- AAnalysing the cost of stock-outs, including lost sales, against the cost of holding safety inventoryCorrect
- BRecommending that the sales team lower prices to clear remaining inventory
- CChanging the depreciation method for delivery vehicles to improve reported profit
Explanation
Accountants support operations by quantifying trade-offs, such as the cost of lost sales versus the cost of safety inventory. Price cuts do not address the supply issue, and changing depreciation to improve profit is inappropriate and unrelated.
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