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Business
AccountingManagerial Accounting: The Cornerstone of Business Decision-Making7th Edition

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Chapter 5, Problem 16MCQ
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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

Solutions

Chapter
Section
Problem 1DQ
Problem 2DQ
Problem 3DQ
Problem 4DQ
Problem 5DQ
Problem 6DQ
Problem 7DQ
Problem 8DQ
Problem 9DQ
Problem 10DQ
Problem 11DQ
Problem 12DQ
Problem 13DQ
Problem 14DQ
Problem 15DQ
Problem 1MCQ
Problem 2MCQ
Problem 3MCQ
Problem 4MCQ
Problem 5MCQ
Problem 6MCQ
Problem 7MCQ
Problem 8MCQ
Problem 9MCQ
Problem 10MCQ
Problem 11MCQ
Problem 12MCQ
Problem 13MCQ
Problem 14MCQ
Problem 15MCQ
Problem 16MCQ
Problem 17MCQ
Problem 18MCQ
Problem 19MCQ
Problem 20MCQ
Problem 21BEA
Problem 22BEA
Problem 23BEA
Problem 24BEA
Problem 25BEA
Problem 26BEA
Problem 27BEA
Problem 28BEA
Problem 29BEB
Problem 30BEB
Problem 31BEB
Problem 32BEB
Problem 33BEB
Problem 34BEB
Problem 35BEB
Problem 36BEB
Problem 37E
Problem 38E
Problem 39E
Problem 40E
Problem 41E
Problem 42E
Problem 43E
Problem 44E
Problem 45E
Problem 46E
Problem 47E
Problem 48E
Problem 49E
Problem 50E
Problem 51E
Problem 52E
Problem 53P
Problem 54P
Problem 55P
Problem 56P
Problem 57P
Problem 58P
Problem 59P
Problem 60P
Problem 61P
Problem 62P
Problem 63C
Problem 64C
BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Suppose that a company is spending $60,000 per year for inspecting, $30,000 for purchasing, and $40,000 for reworking products. A good estimate of nonvalue-added costs would be

  1. a. $70,000.
  2. b. $130,000.
  3. c. $40,000.
  4. d. $90,000.
  5. e. $100,000.

To determine

Identify the option which is providing a correct estimate of the non-value added cost.

Explanation

Value-Added Activities:

Activities that are necessary to be performed and cannot be eliminated are referred as value-added activities. Properties of value-added activities are that, these activities change the state which could not occur because of preceding activities, and these activities are necessary for other activities.

e.

Purchase cost is a value added activity, it is essential to be incurred to procure raw material.

However,inspection would not be required in case, quality is maintained continuously. Also, inspection does not change state of the product. Similarly, amount spent for reworking can be eliminated by increasing the quality of the material. Therefore, non-value added cost would be $100,000($60,000+$40,000), which is computed by adding inspection cost and reworking cost. Therefore, this is the correct option.

a.

$70,000 ($30,000+$40,000) is computed by adding purchase cost and reworking cost

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Ch-5 P-1DQCh-5 P-2DQCh-5 P-3DQCh-5 P-4DQCh-5 P-5DQCh-5 P-6DQCh-5 P-7DQCh-5 P-8DQCh-5 P-9DQCh-5 P-10DQ
Ch-5 P-11DQCh-5 P-12DQCh-5 P-13DQCh-5 P-14DQCh-5 P-15DQCh-5 P-1MCQCh-5 P-2MCQCh-5 P-3MCQCh-5 P-4MCQCh-5 P-5MCQCh-5 P-6MCQCh-5 P-7MCQCh-5 P-8MCQCh-5 P-9MCQCh-5 P-10MCQCh-5 P-11MCQCh-5 P-12MCQCh-5 P-13MCQCh-5 P-14MCQCh-5 P-15MCQCh-5 P-16MCQCh-5 P-17MCQCh-5 P-18MCQCh-5 P-19MCQCh-5 P-20MCQCh-5 P-21BEACh-5 P-22BEACh-5 P-23BEACh-5 P-24BEACh-5 P-25BEACh-5 P-26BEACh-5 P-27BEACh-5 P-28BEACh-5 P-29BEBCh-5 P-30BEBCh-5 P-31BEBCh-5 P-32BEBCh-5 P-33BEBCh-5 P-34BEBCh-5 P-35BEBCh-5 P-36BEBCh-5 P-37ECh-5 P-38ECh-5 P-39ECh-5 P-40ECh-5 P-41ECh-5 P-42ECh-5 P-43ECh-5 P-44ECh-5 P-45ECh-5 P-46ECh-5 P-47ECh-5 P-48ECh-5 P-49ECh-5 P-50ECh-5 P-51ECh-5 P-52ECh-5 P-53PCh-5 P-54PCh-5 P-55PCh-5 P-56PCh-5 P-57PCh-5 P-58PCh-5 P-59PCh-5 P-60PCh-5 P-61PCh-5 P-62PCh-5 P-63CCh-5 P-64C

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