ACCA Performance Management (F5) Certification Practice Exam

In the long term, what is considered more appropriate than TPAR?

1. Standard costing

2. Activity-Based Costing (ABC)

3. Variable costing

4. Budgeting methods

The correct answer is: Activity-Based Costing (ABC)

Activity-Based Costing (ABC) is considered more appropriate than traditional TPAR (Total Productive Activities Reporting) in the long term because it provides a more accurate method of assigning costs to products and services based on actual consumption of resources. ABC recognizes that activities consume resources, and products consume activities, allowing organizations to trace costs more precisely. This detailed cost allocation helps identify inefficiencies and opportunities for cost reduction. By understanding the true cost of each activity, management can make informed decisions regarding pricing, product mix, and process improvements. In contrast to TPAR, which may aggregate costs in a less informative manner, ABC offers detailed insights that are essential in a competitive environment, where understanding cost drivers and profit margins is critical. Additionally, ABC supports strategic decision-making the long term, ensuring that resources are optimally allocated and that operational efficiencies are maximized. This strategic alignment leads to better financial performance and supports long-term sustainability and growth within the organization.