
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Q.Magill is considering the following changes: (a) introducing quality-improvement programs whose net effect will be to reduce rework and expediting costs by 40% and materials and labor costs for servicing machine tools by 5%; (b) working with suppliers to reduce materials-procurement and inspection costs by 20% and materials-handling costs by 30%; and (c) increasing preventive-maintenance costs by 70% to reduce breakdown-maintenance costs by 50%. Calculate the effect of programs (a), (b), and (c) on value-added costs, non-value-added costs, and total costs. Comment briefly.

Transcribed Image Text:Value-added, non-value-added costs. The Magill Repair Shop repairs and services machine tools.
A summary of its costs (by activity) for 2017 is as follows:
a. Materials and labor for servicing machine tools
b. Rework costs
c. Expediting costs caused by work delays
d. Materials-handling costs
e. Materials-procurement and inspection costs
f. Preventive maintenance of equipment
g. Breakdown maintenance of equipment
$1,100,000
90,000
65,000
80,000
45,000
55,000
75,000
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