Cornerstone Exercise 12.1 (Algorithmic) Value- and Non-Value-Added Cost Reporting

Cicleta Manufacturing has four activities: receiving materials, assembly, expediting products, and storing goods. Receiving and assembly are necessary activities; expediting and storing goods are unnecessary. The following data pertain to the four activities for the year ending 2014 (actual price per unit of the activity driver is assumed to be equal to the standard price):

Activity Activity Driver SQ AQ SP Receiving Receiving orders 12,000 27,000 $21 Assembly Labor hours 111,000 135,000 15 Expediting Orders expedited 0 9,000 50 Storing Number of units 0 18,000 7

Required:

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1. Prepare a cost report for the year ending 2014 that shows value-added costs, non-value-added costs, and total costs for each activity. If an amount is zero, enter "0".

Cicleta Manufacturing

Value and Non-Value-Added Cost Report

For the Year Ended 2014

Activity

Value-Added Costs

Non-Value-Added Costs

Total Costs

Receiving

$

$

$

Assembly

Expediting

Storing

Total

$

$

$

2. Explain why expediting products and storing goods are non-value-added activities.