P6-33 (cont.)b.Cost of value-added activities:Machine/labor activities$ 91,000Cost of non-value-added activities:Setup costs$ 1,650Cost to issue raw materials420Movement costs105,000Inspection activities10,000In-process carrying costs15,000Total costs$132,070It appears that the company's non-value-added activities cost substantially more than its value-added activities. This offers much room for cost reductions and suggests that the company may experience difficulty competing with firms that better manage their activities. Although, rarely can all non-value-added activities be eliminated, the discussion leader was correct in stating that management should strive to eliminate as many of such costs as possible without hindering operations.
This is the end of the preview.
access the rest of the document.