A plant produces 92 different electronic products. Each product requires an average of seven components that are purchased externally. By redesigning the products, it is possible to produce the 92 products that have five components in common. This redesign will reduce the demand for purchasing, receiving, and paying bills. Estimated savings from the reduced demand are $1,500,000 per year. What is the non-value-added cost of purchasing, receiving, and paying bills?
A) $600,000
B) $900,000
C) $1,000,000
D) $1,500,000

Question

Quizplus · Accepted Answer

The non-value-added cost is the cost that can be eliminated without affecting the product's value to the customer. Since the redesign leads to savings of $1,500,000 per year, this amount represents the non-value-added cost of the current purchasing, receiving, and paying bills process.

A Plant Produces 92 Different Electronic Products