Exercise 15 & 16 Problem 26

15. Value-Added and Non-Value-Added Activities

Different types of businesses engage in different types of activities. Four businesses follow.

(a)Dillards (department store)

(b)Applebee's (restaurant)

(c)Saturn (automobile manufacturer)

(d)Comet (dry cleaner)

Required:

For each business, list two examples of

(a)A value-added activity

(b)A non-value-added activity

(c)A business-value-added activity

16. Cost Levels and Cost Drivers

Following are ten cost activities that might be incurred in an organization.

(a)Paying a franchise license fee

(b)Transferring a production run to the warehouse

(c)Setting up a printer to run 5,000 copies of a textbook

(d)Maintaining engineering designs for company products

(e)Using wood to manufacture a table

(f)Depreciating a factory building

(g)Delivering meals to hospital patients

(h)Putting a stamp on an envelope

(i)Developing dietary guidelines for special-need meals in a rest home

(j)Drilling a hole in a product

Required:

Classify each of the costs as unit-level, batch-level, product/process level, or organizational level. Identify a cost driver for each item and explain why that driver is appropriate.