ACCA Applied Knowledge · Management Accounting · Cost reductions and value enhancement
Which of the following is the most accurate description of value engineering as used in value enhancement?
Value engineering is redesigning a product at the planning or design stage to cut its cost while still delivering the functions and quality that customers value. It differs from simply cutting quality, from pricing reviews and from activity-based overhead allocation.
- ARedesigning a product before production to reduce cost while keeping the functions customers valueCorrect
- BReducing the cost of a product by cutting quality to the lowest acceptable level
- CReviewing a product's selling price after launch to maximise short-term sales volume
- DAllocating overheads to products on the basis of the activities that cause them
Explanation
Value engineering examines the design stage to remove unnecessary cost without reducing the functions or quality customers value. Cutting quality destroys value, so the second option is wrong. Pricing review and activity-based allocation are different techniques.
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