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

Which of the following is a key difference between the value chain analysis and the traditional value-added analysis used in strategic cost management?

Value chain analysis covers the linked activities from suppliers to final customers, whereas value-added analysis is limited to the firm, from purchases to sales. This wider external scope is why value chain analysis is preferred in strategic cost management.

  1. AValue chain analysis starts with the firm's own purchases and ends with its own sales, ignoring suppliers and customers
  2. BValue chain analysis covers the linked activities from suppliers through to final customers, while value-added analysis begins with purchases and ends with salesCorrect
  3. CValue chain analysis is limited to manufacturing overheads only
  4. DValue chain analysis can be done only after the product has been sold

Explanation

Value chain analysis is broader, covering supplier and customer linkages and the whole sequence of activities. Value-added analysis is confined to the firm, from purchase of inputs to sale of outputs, so the first option describes the narrower approach.

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