For situations 1 trough 6, provide the following information: a. An estimate of the non-value-added cost caused by each activity b. The root caused of the activity cost (such as plant layout, process design, and product design) c. The appropriate cost reduction measure: activity elimination, activity reduction, activity sharing, or activity selection
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
![For situations 1 trough 6, provide the following information:
a. An estimate of the non-value-added cost caused by each activity
b. The root caused of the activity cost (such as plant layout, process design, and product
design)
c. The appropriate cost reduction measure: activity elimination, activity reduction, activity
sharing, or activity selection
1. It takes 1 hour and six pounds of material to produce a product using a traditional
manufacturing process. A process reengineering study provided a new manufacturing process
design (using existing technology) that would take 30 minutes and four pounds of material.
The cost per labor hour is $12, and the cost per pound of material is $10
2. With its original design, a product requires 10 hours of setup time. Redesigning the product
could replace the setup time to an absolute minimum of 30 minutes. The cost per hour of
setup time is $250.
3. A product currently requires eight moves. By redesigning the manufacturing layout, the
number of moves can be reduced from five to zero. The cost per move is $15.
4. Inspection time for a plant is 4,000 hours per year. The cost of inspection consists of salaries
of four inspectors, totaling $100,000. Inspection also uses supplies costing $3 per inspection
hour. A supplier evaluation program, product redesign, and process redesign reduced the
need for inspection by creating a zero-defect environment.
5. Each unit of a product required seven components, the average number of components is 7.3
due to component failure, requiring rework and extra components. By developing relations
with the right suppliers and increasing the quality of the purchased component, the average
number of components can be reduced to seven components per unit. The cost per
component is $600.
6. A plant produces 100 different electronics products. Each product requires an average of
eight components that are purchased externally. The components are different for each part.
By redesigning the products, it is possible to produce the 100 products so that they all have
five components in common, this will reduce the demand for purchasing, receiving, and
paying bills. Estimates savings from the reduced demand are $750,000 per year.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F79d5fa0d-29a4-4b0b-9803-da4930f63368%2F93e7172e-0a0c-4413-a397-24df53db64d4%2Fe7zqezj_processed.png&w=3840&q=75)
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