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

Which statement about value engineering is correct?

Value engineering is carried out at the design stage of a new product, before production begins. It seeks to achieve the functions customers need at the lowest cost, rather than cutting necessary features or focusing only on labour costs.

  1. AIt is carried out at the design stage of a new product, before production begins.Correct
  2. BIt is carried out only after a product has reached the decline stage of its life cycle.
  3. CIt aims to cut cost by reducing the product's functions below customer requirements.
  4. DIt focuses solely on lowering labour costs on the production line.

Explanation

Value engineering looks at product design and specification before production to achieve the required function at lowest cost. It does not reduce necessary functionality, and it covers materials, design and processes, not just labour. Applying it after decline describes no standard use of the term.

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