Value Analysis

By continuously improving the performance of a product / service, its value could be increased thereby leading to reduction of costs. This concept is the base for Value analysis. Value of a product is a relationship between functions it performs and its cost of manufacture. It could be mathematically be expressed as follows:

VALUE = FUNCTION / COST

The above equation implies that value of a product / service could be increased either by improving the functions it performs or by reducing its cost.

Typically a product manufactured would have three types of value

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a) Use Value

Every product is intended to provide a specific service. For example a washing machine is meant to wash clothes; a pen is used to write. This utility value of a product is called its ‘Use Value’.

b) Esteem Value

Certain attributes of a product make it more attractive. Buyers of the product feel esteemed to buy and own the product. Example – A gold coated pen gives an esteemed value to the buyer.

c) Cost Value

Cost of purchasing or manufacturing a product is called ‘Cost value’. In case of manufactured product it is the sum of Material, Labor and Overheads

Usage / Benefits of value analysis:

1) Identify specific solutions to problems

2) Identify focus areas for innovation

FAST model

Function Analysis System Technique is an evolution of Value Analysis process. It creates a HOW-WHY model of a function i.e. it asks the below questions

a) HOW a function is performed (what is the method)?

b) WHY is it performed (with what goal is it performed)?

The model therefore targets to create methods for achieving the desired goals of a task.

Comments

  1. gowtam muktevi says:

    sir
    i request you to post clarifying the difference between apportioning,allocation,absorption differences
    regards
    gowtam.m.v
    mvgeswar_2004@yahoo.com

    • Hi Gowtam,

      If you are looking at Overhead accounting (allocation, apportionment and absorption), please take a look at the topic named ‘Overheads’ in this blog.

      Please feel free if you have any further questions.

      Thanks
      Vijay Kiran

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