Storch Corporation takes eight hours to complete the setup process for a certain electrical component, with the setup cost averaging $150 per hour. If the company's competitor can accomplish the same process in six hours, Stanley's non-value-added cost would be:
A) $0.
B) $150.
C) $300.
D) $900.
E) $1,200.

Question

Quizplus · Accepted Answer

Non-value-added cost refers to any unnecessary cost incurred in the production process. In this case, the setup process takes Storch Corporation eight hours, but their competitor can accomplish the same process in six hours. Therefore, Storch Corporation is spending two additional hours to complete the setup process, which is unnecessary and adds to their non-value-added cost.

The cost of these two additional hours can be calculated as follows:

Setup cost per hour = $150
Additional setup time for Storch Corporation = 8 - 6 = 2 hours
Non-value-added cost for Storch Corporation = Setup cost per hour * Additional setup time
                                                 = $150 * 2
                                                 = $300

Therefore, the best choice for Stanley's non-value-added cost is C, which is $300.

Storch Corporation Takes Eight Hours to Complete the Setup Process