ACCA Performance Management (F5) Certification Practice Exam

What factor affects the decision on material replacement?

1. The number of units available

2. Current purchase price and alternatives

3. Only cost of new materials

4. Future demand for the product

The correct answer is: Current purchase price and alternatives

The decision on material replacement is significantly influenced by the current purchase price and the availability of alternatives. When evaluating a material for replacement, it's crucial to consider the cost implications of sourcing new materials compared to the existing ones. If the current price of the material being considered for replacement is high, it may prompt the organization to look for cheaper alternatives that provide similar quality. Conversely, if alternatives available are more expensive but offer better quality or efficiency, this may also influence the decision. In addition to cost considerations, the availability of substitutes is essential. For instance, if a suitable alternative material can perform the same function but at a lower cost, it may lead an organization to make a countereconomic choice. Other factors, while relevant to overall operational strategy, do not directly influence the decision about whether to replace a material in terms of cost-effectiveness and feasibility in the immediate market context. While future demand for the product is important for long-term planning, it does not directly impact the immediate decision on material replacement. Similarly, the number of units available and solely focusing on the cost of new materials without considering alternatives would not provide a complete picture for decision-making.