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CMA Final · Strategic Cost Management · Introduction to Strategic Cost Management

Kaveri Textiles Ltd analyses its activities from raw cotton procurement to after-sales service and finds that it can cut cost by renegotiating with ginners and by integrating with its dyeing contractor. Which strategic cost management tool is being applied?

The tool is value chain analysis. It examines all linked activities from suppliers through to customers, including supplier and contractor linkages, to find cost advantage, which narrow tools like break-even, standard costing or zero-based budgeting do not do.

  1. AValue chain analysisCorrect
  2. BBreak-even analysis of a single product
  3. CStandard costing of direct labour
  4. DZero-based budgeting of office expenses

Explanation

Examining linked activities from suppliers to customers and finding cost advantage through linkages with suppliers is value chain analysis. Break-even, standard costing and ZBB do not examine the external linkages across the chain.

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