ACCA Applied Knowledge · Management Accounting · Cost reductions and value enhancement
A value analysis team examines a product component with these assessed elements: cost value of $12, exchange value of $15, esteem value of $4 and use value of $9. Based on the team's data, what is the total value the customer places on the component, if value is the sum of use value and esteem value?
The total customer value is $13, found by adding use value of $9 and esteem value of $4. Cost value and exchange value are not part of the sum, so including them produces overstated figures such as $19 or $28.
- A$13Correct
- B$9
- C$19
- D$28
Explanation
Customer value is use value plus esteem value, so 9 + 4 = $13. Using exchange value instead of use value (15 + 4 = 19) is the key mistake in option C. Option B ignores esteem value, and option D adds all four figures, which double counts.
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