Nonvalue-Added Costs
The following six situations at Diviney Manufacturing Inc. are independent.
Required:
Estimate the nonvalue-added cost for each situation.
a. A manual insertion process takes 30 minutes
and 8 pounds of material to produce a product. Automating the
insertion process requires 15 minutes of machine time and 7.5
pounds of material. The cost per labor hour is $12, the cost per
machine hour is $8, and the cost per pound of materials is
$10.
$___________________ per unit
b. With its original design, a gear requires 8
hours of setup time. By redesigning the gear so that the number of
different grooves needed is reduced by 50%, the setup time is
reduced by 75%. The cost per setup hour is $50.
$_______________per setup
c. A product currently requires 6 moves. By
redesigning the manufacturing layout, the number of moves can be
reduced from 6 to 0. The cost per move is $20.
$_____________ unit
d. Inspection time for a plant is 16,000 hours
per year. The cost of inspection consists of salaries of 8
inspectors, totaling $320,000. Inspection also uses supplies
costing $5 per inspection hour. The company eliminated most
defective components by eliminating low-quality suppliers. The
number of production errors was reduced dramatically by installing
a system of statistical process control. Further quality
improvements were realized by redesigning the products, making them
easier to manufacture. The net effect was to achieve a close to
zero-defect state and eliminate the need for any inspection
activity.
$_____________ per year
e. Each unit of a product requires 6
components. The average number of components is 6.5 due to
component failure, requiring rework and extra components.
Developing relations with the right suppliers and increasing the
quality of the purchased component can reduce the average number of
components to 6 components per unit. The cost per component is
$500.
$___________per unit
f. A plant produces 100 different electronic
products. Each product requires an average of 8 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 4 components in common. This will
reduce the demand for purchasing, receiving, and paying bills.
Estimated savings from the reduced demand are $900,000 per
year.
$_______________per year
Answer
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