During a recent accounting period, Marty's 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 labour is paid $14 per hour, the company's non-value-added cost would be:
A)$14.
B)$56.
C)$364.
D)$1,456.
E)$1,820.

Question

Quizplus · Accepted Answer

Non-value-added cost refers to the cost incurred by the company due to inefficiencies, which do not add value to the final product or service. In this case, the non-value-added cost can be calculated as follows:

Total hours required to process orders = 26 orders * 5 hours per order = 130 hours
Normal hours required to process orders = 26 orders * 4 hours per order = 104 hours

Non-value-added hours = Total hours required - Normal hours required = 130 - 104 = 26 hours

Non-value-added cost = Non-value-added hours * Hourly labor cost = 26 * $14 = $364

Therefore, the non-value-added cost is $364 (Option C).

During a Recent Accounting Period, Marty's Shipping Department Processed 26