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ACCA Applied Knowledge · Management Accounting · Accounting for management

Which of the following is the best example of a manager applying knowledge rather than simply receiving information?

The production manager who uses experience to interpret the variance report and decides the overspend is temporary is applying knowledge. Knowledge combines information with experience and judgement. The report, supplier price list and purchase order database are only information or raw data.

  1. AA monthly report showing that material costs were $12,000 above budget
  2. BA spreadsheet listing the prices charged by five suppliers
  3. CA production manager, drawing on past experience of supplier behaviour and the variance report, judges that the overspend is due to a temporary price rise and decides not to change supplierCorrect
  4. DA database of 10,000 purchase orders held on the system

Explanation

Knowledge is information combined with experience, understanding and judgement so that it can be applied. Option C involves interpreting the report using experience and making a judgement. The other options are information or raw data that has not yet been interpreted.

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