Scribd
Upload
2K views2 pages

5-12 Cost Report Value-And Non-Value-Added Costs: Answer

The document provides information on value-added and non-value added costs for four activities - purchasing parts, assembling parts, administering parts, and inspecting parts - at Willson Company for 2005, including activity drivers, standard quantities, actual quantities, and standard prices. It then requires preparing a cost report listing the value-added costs, non-value added costs, and actual costs for each activity, and explaining which activities are non-value added and why value-added activities can have non-value added costs.

Uploaded by

Lydia Samosir
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
2K views2 pages

5-12 Cost Report Value-And Non-Value-Added Costs: Answer

The document provides information on value-added and non-value added costs for four activities - purchasing parts, assembling parts, administering parts, and inspecting parts - at Willson Company for 2005, including activity drivers, standard quantities, actual quantities, and standard prices. It then requires preparing a cost report listing the value-added costs, non-value added costs, and actual costs for each activity, and explaining which activities are non-value added and why value-added activities can have non-value added costs.

Uploaded by

Lydia Samosir
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
  • 5-12 Cost Report; Value-and Non-Value-Added Costs: This section discusses developing value-added standards for cost activities within Willson Company, focusing on identifying value-added and non-value-added costs.

Lydia Stephanie

(008201900051)/ Accounting Class 1

5-12 Cost Report; Value-and Non-Value-Added Costs

Willson Company has developed value-added standards for four activities: purchasing parts,
assembling parts, administering parts, and inspecting parts. The activities, the activity driver,
the standard and actual quantities, and the price standards follow for 2005:

Activities Activity Driver SQ AQ SP


Purchasing parts Orders 1,500 2,100 $300
Assembling parts Labor hours 180,000 199,500 12
Administering Number of parts 18,000 25,800 110
parts
Inspecting parts Inspection hours 0 75,000 15
The actual prices paid per unit of each activity driver were equal to the standard prices.

Required

1. Prepare a cost report that lists the value-added costs, non-value-added costs, and actual
costs for each activity.

2. Which activities are non-value-added? Explain why. Explain why value-added activities
can have non-value-added costs.

Answer

1.

Willson Company
Value-and Nonvalue-Added Cost Report
For the Year Ended December 31, 2005
Activities Value-Added Costs Non-Value-Added Cost Actual Cost
Purchasing parts $ 450,000 $ 180,000 $ 630,000
Assembling parts 2,160,000 234,000 2,394,000
Administering 1,980,000 858,000 2,838,000
parts
Inspecting parts 0 1,125,000 1,125,000
Total $4,590,000 $2,397,000 $6,987,000

Value-added costs = SQ x SP
Non-value-added costs = (AQ - SQ) SP

2. Inspecting parts is nonvalue-added (SQ = 0 is a necessary condition for a nonvalue-added


activity). Inspection is nonvalue-added because it is a state-detection activity, not a state-
changing activity. It also is not essential to enable other activities to be performed. Value-
added activities can engender nonvalue-added costs if they are not performed efficiently.

You might also like