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

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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