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. 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. 2. 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. 3. 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.
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. 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. 2. 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. 3. 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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. 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.
2. 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.
3. 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.
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