Hogwarts Company has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows:
The actual prices paid per unit of each activity driver were equal to the standard prices. The non-value-added costs for labor are
A) $198,000.
B) $34,000.
C) $42,000.
D) $31,000.

Question

Hogwarts Company has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows:
 The actual prices paid per unit of each activity driver were equal to the standard prices. The non-value-added costs for labor are
A) $198,000. 
B) $34,000. 
C) $42,000. 
D) $31,000.

Quizplus · Accepted Answer

Non-value added costs for labor can be calculated using the following formula:
Non-value added costs for labor = (Actual hours - Standard hours) x Standard labor rate
= (22,000 - 20,000) x $1.50
= $3,000 x $1.50
= $4,500
Therefore, the total non-value added costs for labor is $4,500 x 9 (number of employees) = $42,000. Hence, option C is the correct answer.

Hogwarts Company Has Developed Ideal Standards for Four Activities: Labor