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Sydney Ltd manufactures clay flowerpots at Bondi. The management accountant, Amit, has developed an activity-based costing system for the company. The production activities are as follows:

Activity

Description

Set up mould

Customize the mould to suit the design

Mix clay

Clay is mixed as per the required specification to meet customer needs

Shaping

The pots are shaped into the specified design

Inspect pots

Pots inspected to identify faults/cracks

Remould

Faulty pots are remoulded

Store pots

Pots kept ready for painting

Required:

1. Identify two non-value-added activities in the production process above. (1 mark)

2.Explain why the activities identified in (1) can be classified as non-value-added activities. (1 mark)

3.Suggest one possible root cause cost driver for the two non-value-added activities identified in (1). (1 mark)