Apply the Concepts, Cost Reporting Medco Inc., a manufacturing firm, has four activities: purchasing materials, molding, inspecting molds, and grinding imperfect molds. Purchasing materials and molding are necessary activities; inspection and grinding are unnecessary. SQ provides the value-added quantity for each activity; AQ is the actual activity output. The following data pertain to the four activities for the year ending (actual price per unit of the activity driver is assumed to be equal to the standard price): Activity Activity Driver Purchasing Purchasing hours Molding Inspecting Inspection hours Molding hours Grinding. Number of units Required: SQ AQ SP 28,000 34,000 $20 42,000 47,600 121 0 8,400 15 0 6,000 6 1. Prepare a cost report for the year 1 ended that shows value-added costs, non-value-added costs, and total costs for each activity by completing the following table: Value-and Non-Value-Added Cost Report for the Year 1 Ended Activity Value-Added Costs Non-Value-Added Total Costs Costs Purchasing $ Molding 560,000 $ 504,000 ✔ Inspecting 0 120,000 $ 67,200 126,000 V 680,000✓ 571,200 V 126,000 V Grinding Number or units U 0,UUU D Required: 1. Prepare a cost report for the year 1 ended that shows value-added costs, non-value-added costs, and total costs for each activity by completing the following table: Value-and Non-Value-Added Cost Report for the Year 1 Ended Activity Purchasing $ Value-Added Costs 560,000 ✔ Non-Value-Added Costs Total Costs Molding 504,000✔ 120,000 $ 67,200 ✓ 680,000 571,200 Inspecting 0 ✓ 126,000✓ 126,000 Grinding 0 ✓ 36,000 V 36,000 Total 1,064,000 ✓ 349,200✔ 1,413,200 2. Inspection and grinding are non-value-added activities because inspection is a state-detection state-correction ✔activity. activity and grinding is a 3. Purchasing is a step-fixed cost with each step being 2,000 hours. Suppose that the efficiency of purchasing is increased so that the demand for purchasing activity is 31,000 hours. What is the reduction in the cost achieved by the increased efficiency? Reduction: $ 41,000 X Feedback Check My Work