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

Vikram Engineering Ltd uses a cost driver analysis. Structural cost drivers include scale, scope, experience, technology and complexity; executional drivers include workforce commitment, quality management and plant layout. Which of the following is a structural driver choice rather than an executional driver?

Building a new plant with double the capacity is a structural cost driver, because it is a long-term strategic choice about scale. Employee involvement, supplier relationship management and plant layout utilisation concern execution of existing operations and are executional drivers.

  1. AEmployee involvement in continuous improvement
  2. BDecision to build a new plant with double the capacityCorrect
  3. CSupplier relationship quality management
  4. DEfficient plant layout utilisation

Explanation

Structural drivers are long-term strategic choices about the firm's economic structure, such as scale, scope, technology and complexity. A decision to double plant capacity is a scale choice. The others relate to how well existing operations are executed, so they are executional drivers.

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