Inspection time for a plant is 10,000 hours per year. The cost of inspection consists of salaries of four inspectors, totaling $60,000. Inspection also used supplies costing $3 per inspection hour. The company has a close to zero defect state and has eliminated the need for any inspection activity. Calculate the nonvalue-added cost of inspection per year.
A) $30,000
B) $60,000
C) $90,000
D) $120,000

Question

Quizplus · Accepted Answer

The non-value added cost of inspection is calculated as follows:

Non-value added cost = (total inspection hours) x (cost per inspection hour)
Total inspection hours = 10,000 hours per year
Cost per inspection hour = Salaries of inspectors + Supplies cost
                     = $60,000 + ($3 x 10,000)
                     = $60,000 + $30,000
                     = $90,000

Therefore, the non-value added cost of inspection per year is $90,000.

Inspection Time for a Plant Is 10,000 Hours Per Year