Each unit of product requires 16 kilograms of material.Due to scrap and rework,each unit has been averaging 18 kilograms of material.The material costs $6 per pound.What would be the currently attainable standard for material if the company wants to reduce non-value-added costs by 25 percent next year?
A)16.00 kilograms
B)16.80 kilograms
C)17.50 kilograms
D)18.00 kilograms

Question

Quizplus · Accepted Answer

Currently, each unit is using 18 kilograms of material instead of the standard 16 kilograms. This means there is a non-value-added cost of 2 kilograms of material per unit. To reduce this cost by 25%, the company needs to aim for a standard that is 25% less than the current non-value-added cost.

25% of 2 kilograms = 0.5 kilograms
Current Standard = 18 kilograms
New Standard = Current Standard - 0.5 kilograms
New Standard = 17.5 kilograms

Therefore, the currently attainable standard for material is 17.5 kilograms (Choice C).

Each Unit of Product Requires 16 Kilograms of Material