During a recent accounting period,Marty's shipping department processed 26 orders.Each order typically takes four hours to complete;however,the average time increased to five hours because of various departmental inefficiencies.If shipping labor is paid $14 per hour,the company's non-value-added cost would be:

Question

Quizplus · Accepted Answer

The non-value-added cost is the additional cost incurred due to inefficiencies and wastage of resources. In this case, the inefficiencies increased the completion time for each order by 1 hour (from 4 hours to 5 hours). Therefore, the additional time spent on each order is 1 hour x 26 orders = 26 hours.

The labor cost for this additional time is $14 per hour x 26 hours = $364. Hence, the non-value-added cost for the accounting period is $364.

Choice A is incorrect as there is a non-value-added cost incurred due to the inefficiencies.

Choice B is incorrect as $56 is not sufficient to cover the additional labor cost incurred due to inefficiencies.

Choice D and E are incorrect as the values are too high and do not reflect the additional labor cost incurred due to inefficiencies.

During a Recent Accounting Period,Marty's Shipping Department Processed 26 Orders