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ACCA Applied Knowledge · Management Accounting · Cost reductions and value enhancement

Which of the following best describes the 'use value' of a product component in a value analysis exercise?

Use value is the value a component provides through the work it does, meaning its ability to perform its intended function. It is distinct from cost value, exchange value, and esteem value, which relates to prestige or appearance rather than function.

  1. AThe cost of materials plus labour needed to make the component
  2. BThe price at which the component could be sold to outsiders
  3. CThe value arising from the component's ability to perform its functionCorrect
  4. DThe prestige or attractiveness the component gives the product

Explanation

Use value is the value of the component in performing its intended function, such as keeping parts together. Esteem value is about attractiveness and prestige, so option D is wrong. Cost value is the cost to produce and exchange value is the market price, covering options A and B.

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