Question:
COST REPORT, VALUE-ADDED AND NON-VALUE-ADDED COSTS
Zurcher Company has developed value-added standards for four activities: purchasing parts, receiving parts, moving parts, and setting up equipment. The activities, the activity drivers, the standard and actual quantities, and the price standards for 2006 are as follows:
|
Activities
|
Activity Driver
|
SQ
|
AQ
|
SP
|
|
Purchasing parts
|
Purchase orders
|
1,000
|
1,400
|
$150
|
|
Receiving parts
|
Receiving orders
|
2,000
|
3,000
|
100
|
|
Moving parts
|
Number of moves
|
0
|
1,000
|
200
|
|
Setting up equipment
|
Setup hours
|
0
|
4,000
|
60
|
The actual prices paid per unit of each activity driver were equal to the standard prices.
Required:
1. Prepare a cost report that lists the value-added, non-value-added, and actual costs for each activity.
2. Which activities are non-value-added? Explain why. Also, explain why valueadded activities can have non-value-added costs.