Which of the following statements about the limitations of Value Chain Analysis

Question

Which of the following statements about the limitations of Value Chain Analysis is false?

a. Truly comparable activities may be difficult to identify.
b. Information may be difficult to obtain.
c. ROI (return on investment) measures are accurate measures of profitability and power.
d. Measures that correlate better with firm value are needed.
e. Successful differentiation and costs management will require detailed costs analysis.

Which of the following statements is NOT a weakness of Segment reporting systems?

a. Common costs are difficult to allocate based upon cause and effect.
b. Segments often influence each other’s performance.
c. Failure to identify direct segment costs.
d. All accounting measures are subject to errors and may be estimates.
e. All of the above statements are correct.

Which type of control uses accounting data?

a. Bureaucratic rules.
b. Clan control.
c. Market control.
d. Market and Bureaucratic
e. Accounting data is rarely if ever used in these types of control.

Why is plant capacity a factor in our decision to accept or not accept a special order?

a. Capacity is not a factor.
b. Capacity dictates how much fixed overhead we must allocate for the related manufacturing cost.
c. As capacity increases, depreciation per product decreases.
d. Available capacity indicates whether we must forego any normal sales.
e. None of the above is correct.

Explanation / Answer

a Statement C is false. Return on Investment is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. Value analysis on the other hand identifies the key activities within a firm which form the value chain for that organisation and have a sustainable competitive advantage for a company. Both are entirely two different concepts. Hence, ROI cannot be the weakness of Value chain analysis. b All of the above statements are true. c d.Market and beauracratic controls use accounting data. These data include Income figures , sales figures, market share figures etc. d d. Available capacity indicates whether or not we need to forego normal sales. Capacity is the maximium amount that can be produced by a plant during a particular period. Hence, when we are considering a special order we should assess whether we have any available capacity.

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