Question

Test Company recently completed a process value analysis on all activities in an effort to identify...

Test Company recently completed a process value analysis on all activities in an effort to identify and eliminate nonvalue-added cost. The analysis revealed the following information for the painting activity.

Painting: It currently takes 1.9 hours to paint one unit of product. A time and motion study showed that if the process was redesigned, one unit of product could be painted in 1.6 hours. Painting cost is $22 per hour, and annual production averages 30,000 units of product.

Q1. Calculate the total actual cost currently incurred for the painting activity.

Note: Give your answer using dollar signs and commas but no decimal points (cents).

Example: $12,345

Q2. Calculate the total value-added cost for the painting activity.

Note: Give your answer using dollar signs and commas but no decimal points (cents).

Example: $12,345

Q3. Determine the total nonvalue-added cost for the painting activity.

Note: Give your answer using dollar signs and commas but no decimal points (cents).

Example: $12,345

Test Company produced 500 units during the most recent 10-hour shift.

Calculate the cycle time.

a.

0.02 hours per unit
b.

50 units per hour
c.

50 hours per unit
d.

0.02 unit per hour
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Homework Answers

Answer #1

1. Computation of the total actual cost currently incurred for the painting activity:

Total Cost = Total Units * Hours per unit * Cost per hour

Therefore, Total Cost = 30,000 * 1.9 * $22 = $1,254,000

2. Computation of the total value-added cost for the painting activity:

Total Value added Cost = Total Units * Hours per unit (if redisgned)* Cost per hour

Therefore, Total Value added Cost = 30,000 * 1.6 * $22 = $1,056,000

3. Computation of the total non value-added cost for the painting activity:

Total Value added Cost = Total Units * (Total Hours per unit - Hours per unit if redisgned)* Cost per hour

Therefore, Total Value added Cost = 30,000 * (1.9-1.6) * $22 = $198,000

4. Computation of Cycyle Time:

Cycyle Time = Total Units/Total Production Hours

Therefore, Cycyle Time = 500/10 = 50 units per hour

Hence, option c is the correct answer.

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