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 labor is paid $14 per hour, the company's non-value-added cost would be:
A) $0.
B) $56.
C) $364.
D) $1,456.
E) $1,820.

Question

Quizplus · Accepted Answer

To calculate the non-value-added cost, we need to find the additional cost incurred due to the inefficiencies in the shipping department.

Each order typically takes 4 hours, so for 26 orders, the total time required should be:

4 hours/order * 26 orders = 104 hours

However, due to inefficiencies, the actual time taken was:

5 hours/order * 26 orders = 130 hours

Therefore, the additional time required due to inefficiencies was:

130 hours - 104 hours = 26 hours

The non-value-added cost would be the additional labor cost incurred for these 26 hours.

Labor cost per hour = $14

Non-value-added cost = 26 hours * $14/hour = $364

Hence, the correct answer is C.

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