ACCA Performance Management (F5) Certification Practice Exam

What aspect of services does heterogeneity refer to in target costing?

1. Services are not performed the same way

2. Services can be stored

3. Services involve physical products

4. Services have high fixed costs

The correct answer is: Services are not performed the same way

The concept of heterogeneity in services relates to the variability and uniqueness associated with service delivery. Each service interaction can differ due to a variety of factors, such as the personnel involved, the location, the circumstances, and even customer preferences. This inherent variability affects how services are perceived by customers and can impact cost structures when implementing target costing. By acknowledging that services are not performed in a uniform manner, businesses can better understand the implications for cost management and pricing strategies. Target costing seeks to ensure profitability by aligning costs with anticipated selling prices, and recognizing heterogeneity is crucial for developing efficient service delivery processes that meet customer expectations while controlling costs effectively. In contrast, the other options do not accurately reflect the concept of heterogeneity. While services can involve complexities regarding storage, physical products, and fixed costs, these elements do not capture the essence of variability in service quality and performance, which is central to understanding heterogeneity in this context.