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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.

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Cornerstones of Cost Management (C...

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

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BuyFindarrow_forward

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.

Chapter 12, Problem 15E, Refer to Exercise 12.14. Suppose that for 20x2, Sanford, Inc., has chosen suppliers that provide

Required:

  1. 1. Prepare a report that compares the non-value-added costs for 20x2 with those of 20x1.
  2. 2. What is the role of activity reduction for non-value-added activities? For value-added activities?
  3. 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:

Non-value-added costs = (SQAQ)SP 

Incorporation S
Non-Value-Added Cost Report
For the Year Ended December 31, 20X2
ParticularsAQ (Units)SQ (Units)SP ($)(AQ-SQ)SP ($)20X1 ($) (A)20X2 ($) (B)Change ($) (A-B)
Purchasing parts       
20X13,6402,600300  312,000  312,000   
20X23,1202,600 300  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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Chapter 12 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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