Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What might be a result of increased attention to efficiency in divisionalisation?

1. Reduced communication among divisions

2. Lower costs and higher profits

3. Less authority for junior managers

4. Increased managerial overhead

The correct answer is: Lower costs and higher profits

Increased attention to efficiency in divisionalisation typically leads to lower costs and higher profits. When a company focuses on improving efficiency within its divisions, it often streamlines processes, optimizes resource allocation, and eliminates wasteful practices. This enhances the overall performance of the divisions, resulting in reduced operational costs. As divisions become more efficient, they can produce goods or deliver services at a lower cost, which can lead to increased margins and overall profitability. Furthermore, efficient divisions can respond better to market demands, allowing for more effective pricing strategies that can further enhance profitability. This concept ties into the broader principles of operational efficiency, where improved processes and resource management directly correlate to financial performance. The other options reflect aspects that may be seen in different contexts but do not align with the positive outcomes generally associated with increased efficiency during divisionalisation. For example, while communication among divisions could be impacted, reducing costs and enhancing profitability are more directly linked to heightened efficiency efforts.