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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Strategic Cost & Performance Management

Case: Malabar Spices Ltd is analysing its value chain. It finds that its outbound logistics cost is high because it uses many small regional distributors. It decides to examine the cost drivers of each activity across suppliers, itself and customers, and to see where it can gain a cost advantage. Which tool is it primarily using?

Malabar is using value chain analysis. It examines each activity from suppliers through to customers, identifies its cost drivers such as distribution structure, and looks for ways to gain cost advantage. Break-even, variance analysis and zero-based budgeting do not map activity linkages.

  1. AValue chain analysisCorrect
  2. BBreak-even analysis
  3. CVariance analysis
  4. DZero-based budgeting

Explanation

Value chain analysis breaks the business into primary and support activities, from suppliers to customers, to identify cost drivers and sources of cost advantage. The other tools do not examine linkages across activities.

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