Setup time for a product is 12 hours. A firm that uses JIT and produces the same product has reduced setup time to 1 hour. Setup labor is $6 per hour. The non-value-added costs are
A)$72.
B)$66.
C)$12.
D)$6.

Question

Quizplus · Accepted Answer

Non-value-added costs are those costs that do not add value to the product and could be eliminated without deteriorating the product's quality. The reduction in setup time from 12 hours to 1 hour means that 11 hours of setup time were non-value-added, as they were successfully eliminated. At $6 per hour, the non-value-added costs are 11 hours * $6/hour = $66.

Setup Time for a Product Is 12 Hours