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ACCA Strategic Professional · Advanced Performance Management · Strategic management accounting

Ostrava Components has a strong traditional management accounting system producing monthly cost variances. The board complains that reports do not help it judge whether the strategy of moving into premium customised products is succeeding. Which improvement would most directly align the management accounting function with strategic needs?

Adding customer profitability and value-driver measures linked to the strategic objectives is best. It gives the board information on whether the premium customisation strategy is working, whereas more variance reporting, overhead allocation or incremental budgets remain internally and short-term focused.

  1. AAdd customer profitability and value-driver measures linked to the strategic objectivesCorrect
  2. BIncrease the frequency of material price variance reports to weekly
  3. CAllocate all central overheads on direct labour hours
  4. DPrepare budgets with a one-year incremental approach only

Explanation

Strategic information should link to the chosen strategy, so customer profitability and value-drivers for premium customisation are relevant. More frequent variances, labour-hour overhead allocation and incremental budgeting stay focused on internal, short-term cost control.

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