Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What type of technological progress would be described as achieving capital savings?

1. Advancements using less labor and capital

2. Reductions in resource usage

3. Technological advances using less capital with the same labor

4. Improvements in labor efficiency

The correct answer is: Technological advances using less capital with the same labor

The concept of achieving capital savings through technological progress refers specifically to advancements that enable an entity to reduce its reliance on capital while maintaining the same level of labor input. This means that improved technologies or processes allow a business to operate more efficiently by using less physical capital, such as machinery or facilities, without compromising the workforce's size or productivity. When technology advances in a way that allows for fewer capital resources to be employed with the same labor force, it results in capital savings. This is a strategic advantage for organizations, as it can lead to lower operational costs and improved return on investment. In contrast, the other options involve elements of efficiency or resource management that may not directly lead to capital savings. For example, advancements using less labor and capital may not ensure that capital is specifically reduced while maintaining labor, and simple reductions in resource usage do not necessarily link to saving capital. Improvements in labor efficiency focus solely on how effectively labor is utilized, which does not directly touch upon capital savings. Thus, the correct answer emphasizes the relationship between capital use and labor maintenance in the context of technological progress.