Advantages of Value Added Statements

1) Managers might be in a better position to control their organizations own inputs than the cost and usage efficiency of purchased material and services. Value added statements focus on what managers can do something about.

2) Value added statements can reflect the quality and success of management effort.

3) Value added statements also focus attention on how the benefits are shared out and in particular:

4) Whether employees are paid too much for what they are doing.

5) Whether enough funds are being retained in the business in the form of internally funded growth.

6) Value added in relation to labor cost provide excellent measures of productivity and therefore can be used for comparing the relative productivity of two or more divisions.