Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What best describes a modular organization?

1. A company that outsources management functions

2. A manufacturing company that outsources the production of modules

3. A service provider with minimal in-house staff

4. A company with multiple divisions under a single corporate umbrella

The correct answer is: A manufacturing company that outsources the production of modules

A modular organization is best described as a manufacturing company that outsources the production of modules. This organizational structure emphasizes flexibility and efficiency by breaking down production into more manageable, specialized units or "modules." Each module can be produced independently, often by different suppliers or partners, allowing the company to focus on its core competencies such as design and assembly rather than the entirety of the manufacturing process. By outsourcing the production of modules, companies can respond more rapidly to changing market demands, optimize resource allocation, and reduce costs associated with manufacturing. This structure also allows for scalability; as production needs change, companies can adjust the number of modules they order without a complete overhaul of their production process. In contrast, options discussing outsourced management functions, minimal in-house staff, or multiple divisions under one corporate umbrella do not accurately capture the essence of a modular organization. These focus on management structures or organizational breadth rather than the specific manufacturing concept related to modular production.