ACCA Applied Skills · Performance Management · Target costing
Which of the following is the most appropriate technique for closing a target cost gap by examining whether each function of a product is worth its cost to the customer?
Value engineering is the appropriate technique. It analyses product functions against their cost, removing or simplifying features customers do not value, so that the cost is reduced towards the target without losing needed quality or functionality.
- AValue engineeringCorrect
- BVariance analysis
- CBackflush accounting
- DAbsorption costing
Explanation
Value engineering reviews design, materials and functions to remove cost that adds no value to the customer while keeping required functionality. The others do not systematically redesign the product to reduce cost.
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