Maquina Company produces custom-made machine parts. Maquina recently has implemented an activity-based management (ABM) system with the
Question:
Required:
1. Calculate the volume and unused capacity variances for the setup activity. Explain what each variance means.
2. Prepare a report that presents value-added, non-value-added, and actual costs for setup. Explain why highlighting the non-value-added costs is important.
3. Assume that management is able to reduce the demand for the setup activity so that the actual hours needed drop from 26,200 to 4,000. What actions should now be taken regarding activity capacity management?
4. Another activity studied was inspection of supplier materials and components. Explain why inspecting incoming goods should be viewed as a non-value-added activity. In providing your explanation, consider the following counterargument: “Inspecting incoming goods adds value because it reduces the demand for other unnecessary activities such as rework, reordering, and warranty work.”
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Cornerstones of Cost Management
ISBN: 978-1285751788
3rd edition
Authors: Don R. Hansen, Maryanne M. Mowen
Question Posted: