Exercises 7-11 Value-added, non-value-added costs. The McGowan Repain services machine tools. A summary of its costs (by activity) for 2012 is as follows: Shop repairs and a. Materials and labor for servicing machine tools b. Rework costs c. Expediting costs caused by work delays d. Materials-handling costs e. Materials-procurement and inspection costs f. Preventive maintenance of equipment g. Breakdown maintenance of equipment $500,000 150,000 75,000 50,000 60,000 40,000 75,000 quired 1. Classity each cost as value-added, non-value-added, or in the gray area between. 2. For any cost assified in the gray area, assume 65% value-added and 35% is non-value-added. How much of the total of all seven costs is value-added and how much is non-value-added? 3. McGowan is considering the following changes:(a) introducing quality-improvement programs whose net effect will be to reduce rework and expediting costs by 60% and materials and labor costs for servicing machine tools by 5%; working with suppliers to reduce material procurement and inspection costs by 20% and materials-handling costs by 25%; and (c) increasing preventive-maintenance costs by 40% to reduce breakdown-maintenance costs by 50%. Calculate the effect of programs (a), (b), and (c) on value- added costs, non-value-added costs, and total costs. Comment briefly