# Refer to Exercise 12.14. Suppose that for 20x2, Sanford, Inc., has chosen suppliers that provide higher-quality parts and redesigned its plant layout to reduce material movement. Additionally, Sanford implemented a new setup procedure and provided training for its purchasing agents. As a consequence, less setup time is required and fewer purchasing mistakes are made. At the end of 20x2, the information shown on page 680 is provided. Required: 1. Prepare a report that compares the non-value-added costs for 20x2 with those of 20x1. 2. What is the role of activity reduction for non-value-added activities? For value-added activities? 3. Comment on the value of a trend report.

### Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

Chapter
Section

### Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 12, Problem 15E
Textbook Problem
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## Refer to Exercise 12.14. Suppose that for 20x2, Sanford, Inc., has chosen suppliers that provide higher-quality parts and redesigned its plant layout to reduce material movement. Additionally, Sanford implemented a new setup procedure and provided training for its purchasing agents. As a consequence, less setup time is required and fewer purchasing mistakes are made. At the end of 20x2, the information shown on page 680 is provided.Required: 1. Prepare a report that compares the non-value-added costs for 20x2 with those of 20x1. 2. What is the role of activity reduction for non-value-added activities? For value-added activities? 3. Comment on the value of a trend report.

1.

To determine

Make a report that compares the non-value-added costs for 20x2 with those of 20x1 for incorporation S.

### Explanation of Solution

Non-value-added costs: Non-value-added costs are the costs that are incurred due to non-value-added activities or the inefficient performance of value-added activities. Due to the increased competition, many firms are trying to eliminate non-value-added activities and an insignificant portion of value-added activities, as they consume unnecessary costs and prevent performance.

Prepare report that compares the non-value-added costs for 20x2 with those of 20x1 for incorporation S:

Note: The given table (1) is prepared based on the following equation:

 Incorporation S Non-Value-Added Cost Report For the Year Ended December 31, 20X2 Particulars AQ (Units) SQ (Units) SP ($) (AQ-SQ)SP ($) 20X1 ($) (A) 20X2 ($) (B) Change (\$) (A-B) Purchasing parts 20X1 3,640 2,600 300 312,000 312,000 20X2 3,120 2,600 300 156,000 �

2.

To determine

Identify the role of activity reduction for non-value-added activities and also for value-added activities.

3.

To determine

Provide comment on the value of the trend report.

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