A manual process takes 36 minutes of direct labour time and 12 kg of material to make a product.Automating the process requires 24 minutes of machine time and 10 kg of material.The cost per labour hour is $18,the cost per machine hour is $14,and the cost per kilogram of materials is $22.What is the non-value-added cost per unit?
A)$5.60 per unit
B)$10.80 per unit
C)$44.00 per unit
D)$49.20 per unit

Question

Quizplus · Accepted Answer

First, we need to calculate the direct cost of making a product with the manual process and automated process.

Manual process direct cost = (36 mins/60 mins) * $18/hour + 12 kg * $22/kg = $12.6 + $264 = $276.6

Automated process direct cost = (24 mins/60 mins) * $14/hour + 10 kg * $22/kg = $9.6 + $220 = $229.6

The non-value-added cost per unit is the difference between the two direct costs:

Non-value-added cost per unit = $276.6 - $229.6 = $47

Therefore, the answer is D, $49.20 per unit (rounded to the nearest cent).

A Manual Process Takes 36 Minutes of Direct Labour Time