How Is Value-Engineering Relevant to a Well Done Customer Profitability

question 113

Multiple Choice

How is value-engineering relevant to a well done customer profitability analysis, especially when an ABC system is utilized to calculate customer profits (or losses) ?

• A) ABC will satisfy GAAP and provide input into value-engineering decisions
• B) ABC offers the opportunity to analyze the costs of activities assigned to each customer and to determine if improvements can be made to optimize profits
• C) customer profitability analysis will reveal that the cost drivers of less profitable customers are the problem and that value-engineering is the solution
• D) Only value-added activities will be shown in the cost analysis and thus all other costs will be eliminated via value-engineering

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Definitions:

Gross Method

An accounting method where purchases are recorded at their full (gross) cost without deducting any cash discounts.

Credit Terms

Conditions under which credit is extended by a lender to a borrower, including the repayment period, interest rate, and the amount of the loan.

Sales Discounts

Reductions in the sale price offered by a seller to a buyer, typically to encourage prompt payment or in response to bulk orders.

Sales Returns

Goods returned by customers post-purchase, leading to a reversal of sales revenue.