During a recent accounting period, Falcon Express' shipping department processed 26 orders. Each order typically takes four hours to complete. However, the average time increased to five hours because of various departmental inefficiencies. If shipping labor is paid $14 per hour, the company's non-value-added cost would be:
A) $0.
B) $56.
C) $364.
D) $1,456.
E) $1,820.

Question

Quizplus · Accepted Answer

The non-value-added cost is calculated by identifying the additional time spent due to inefficiencies and then multiplying that by the labor cost per hour. The inefficiency added 1 hour per order (5 hours instead of the standard 4 hours), for a total of 26 extra hours. At $14 per hour, the non-value-added cost is 26 hours * $14/hour = $364.

During a Recent Accounting Period, Falcon Express' Shipping Department Processed