Dayton Extruded Plastics is a manufacturer of injection molded extrusions. In the past, scrapped or defective extrusions were ground into powder and fed back into the extruders as raw materials. Defective extrusions were inspected out during line work and in handling returns from customers; they were
then ground up in special grinding machines and mixed with new raw material and reused. Because all scrapped extruders were reused in this way, company management felt that the cost of scrap was "free."
The company's traditional cost accounting system did not associate any cost with the cost of processing scrap.
Required:
(a) What questions are asked by a company in testing for value-added activities?
(b) In the context of those questions, would the processing of scrapped extruders constitute value-added or non-value added activities? Is the company's view that scrap costs nothing a valid one?

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The Answer of Dayton Extruded Plastics is a manufacturer of injection molded extrusions. In the past, scrapped or defective extrusions were ground into powder and fed back into the extruders as raw materials. Defective extrusions were inspected out during line work and in handling returns from customers; they were
then ground up in special grinding machines and mixed with new raw material and reused. Because all scrapped extruders were reused in this way, company management felt that the cost of scrap was "free."
The company's traditional cost accounting system did not associate any cost with the cost of processing scrap.
Required:
(a) What questions are asked by a company in testing for value-added activities?
(b) In the context of those questions, would the processing of scrapped extruders constitute value-added or non-value added activities? Is the company's view that scrap costs nothing a valid one?

Dayton Extruded Plastics Is a Manufacturer of Injection Molded Extrusions