IDENTIFY VALUE ADDED AND NON-VALUE ADDED ACTIVITIES

Activity analysis; non-value-added costs; cost drivers: manufacturer Contemporary Kitchen Furnishings Ltd (CHF) manufactures a variety of homewares for the consumer market. The company's three major product lines are cooking utensils, tableware, and flatware. Contemporary Kitchen Furnishings implemented activity-based costing four years ago and now has a well-developed ABC system in place for determining product costs. Only recently. however, has the ABC system been systematically used for the purposes of activity based management. As a pilot project, CKF's controller asked the ABC project team to complete a detailed activity analysis of the purchasing activity. The following specific activities were identified: 1 Receipt of parts specifications from the Design Engineering Department. 2 Follow-up with design engineers to answer any questions. 3 Vendor (supplier) identification. 4 Vendor consultations (by phone or in person). 5 Price negotiation. 6 Vendor selection 7 Ordering (by phone or email) 8 Order follow up. INFORMATION FOR MANAGING RESOURCES 9 Expediting attempting to speed up delivery. 10 Receipt of orders. 11 Inspection of parts 12 Return of parts not meeting specifications. 13 Consultation with design engineers and production personnel if parts do not satisfy intended purpose 14 Further consultation and/or negotiation with vendor if necessary. 15 Shipping parts back to vendor if necessary 16 If satisfactory, moving parts to storage. Activity analysis; non-value-added costs; cost drivers: manufacturer Contemporary Kitchen Furnishings Ltd (CHF) manufactures a variety of homewares for the consumer market. The company's three major product lines are cooking utensils, tableware, and flatware. Contemporary Kitchen Furnishings implemented activity-based costing four years ago and now has a well-developed ABC system in place for determining product costs. Only recently. however, has the ABC system been systematically used for the purposes of activity based management. As a pilot project, CKF's controller asked the ABC project team to complete a detailed activity analysis of the purchasing activity. The following specific activities were identified: 1 Receipt of parts specifications from the Design Engineering Department. 2 Follow-up with design engineers to answer any questions. 3 Vendor (supplier) identification. 4 Vendor consultations (by phone or in person). 5 Price negotiation. 6 Vendor selection 7 Ordering (by phone or email) 8 Order follow up. INFORMATION FOR MANAGING RESOURCES 9 Expediting attempting to speed up delivery. 10 Receipt of orders. 11 Inspection of parts 12 Return of parts not meeting specifications. 13 Consultation with design engineers and production personnel if parts do not satisfy intended purpose 14 Further consultation and/or negotiation with vendor if necessary. 15 Shipping parts back to vendor if necessary 16 If satisfactory, moving parts to storage