A time-and-motion study revealed that it should take 3 hours to produce a product that currently takes 7.5 hours to produce.Labour is $18 per hour.What are the value-added costs?
A)$27
B)$54
C)$81
D)$135

Question

Quizplus · Accepted Answer

Value-added costs are the costs associated with the actual production of a product or service. In this case, the time-and-motion study revealed that it should take 3 hours to produce the product, but it currently takes 7.5 hours, meaning that there is an opportunity to reduce labour costs by 4.5 hours. Multiplying 4.5 by the labour cost of $18 per hour gives us a value-added cost savings of $81. Therefore, the correct answer is B) $54, which is half of the value-added cost savings, as the question is asking for the value-added costs, not the savings.

A Time-And-Motion Study Revealed That It Should Take 3 Hours