Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen

Exercise 35

Gorman Company has developed value-added standards for four activities: purchasing parts, receiving parts, moving parts, and setting up equipment. The activities, the activity drivers, the standard and actual quantities, and the price standards for 2010 are as follows:

The actual prices paid per unit of each activity driver were equal to the standard prices.
Required:
1. Prepare a cost report that lists the value-added, non-value-added, and actual costs for each activity.
2. Which activities are non-value-added? Explain why. Also, explain why value-added activities can have non-value-added costs.