Bandolero Corporation has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows: $$\begin{array} { l l r r r }
\text { Activity } & \text { Activity Driver } & \text { SQ } &{ \text { AQ } } & \text { SP } \
\text { Inspection } & \text { Inspection hours } & 0 & 40,000 & \$ 12 \
\text { Labor } & \text { Hours } & 50,000 & 56,000 & 18 \
\text { Materials } & \text { Pounds } & 100,000 & 105,000 & 15 \
\text { Receiving } & \text { Orders } & 150 & 190&450
\end{array}$$ The actual prices paid per unit of each activity driver were equal to the standard prices. The non-value-added costs for inspection are
A)$480,000.
B)$60,000.
C)$420,000.
D)$40,000.

Question

Bandolero Corporation has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows: $$\begin{array} { l l r r r } 
\text { Activity } & \text { Activity Driver } & \text { SQ } &{ \text { AQ } } & \text { SP } \
\text { Inspection } & \text { Inspection hours } & 0 & 40,000 & \$ 12 \
\text { Labor } & \text { Hours } & 50,000 & 56,000 & 18 \
\text { Materials } & \text { Pounds } & 100,000 & 105,000 & 15 \
\text { Receiving } & \text { Orders } & 150 & 190&450
\end{array}$$ The actual prices paid per unit of each activity driver were equal to the standard prices. The non-value-added costs for inspection are
A)$480,000.
B)$60,000.
C)$420,000.
D)$40,000.

Quizplus · Accepted Answer

The non-value-added costs for inspection are the actual costs incurred for inspection minus the standard costs for inspection. The actual costs for inspection are equal to the actual price paid per unit of the activity driver (inspection hours) multiplied by the actual quantity of the activity driver used (40,000 hours). The standard costs for inspection are equal to the standard price per unit of the activity driver (inspection hours) multiplied by the standard quantity of the activity driver allowed (0 hours). Therefore, the non-value-added costs for inspection are equal to:Actual costs for inspection - Standard costs for inspection= (Actual price per unit of activity driver * Actual quantity of activity driver used) - (Standard price per unit of activity driver * Standard quantity of activity driver allowed)= ($12 * 40,000 hours) - ($12 * 0 hours)= $480,000

Bandolero Corporation Has Developed Ideal Standards for Four Activities: Labor