In conducting interviews and observing factory operations to implement an activi

Question

In conducting interviews and observing factory operations to implement an activity-based costing system, you determine that several activities are unnecessary or redundant. For example, warehouse personnel were inspecting purchased components as they were received at the loading dock. Later that day, the components were inspected again on the shop floor before being installed in the final product. Both of these activities caused costs to be incurred but were not adding value to the product. If you include this observation in your report, one or more employees who perform inspections will likely lose their jobs.

Required

1. As a plant employee, what is your responsibility to report your findings to superiors?

2. Should you attempt to determine if the redundancy is justified? Explain.

3. What is your responsibility to the employees whose jobs will likely be lost by your report?

4. What facts should you consider before making your decision to report or not?

I need one outside resource please

Explanation / Answer

Ans 1 Activities are of two type value added activities and non value added activities. So non value added activities do not add value to the product thereby should be reduced. But few non value added activities are essential non value added activities which means these are necessary in order to comply with standard requirements.The activities like inspection, checking, reworking,reporting are important in the process of production. These are important for the process of accountability and tracebility. These do not add value to the activity but still it is important to carry these activities because these will help to give the right product to the customer.

So when the components are received at dock it is important to inspect them because to know are the products are in good condition, whether those are damaged/defective or not. Is the quantity ordered is received or less is received. So inspection is really important else whatever is received will be accepted which will in turn will make the company product defective.

Now the product was inspected again before being installed in final product this is also an essential non value added activity, because to fulfil the standard set for the product we have to inspect that right component is installed in final product. Let say if the employee do not inspect and wrong product is installed in the final product than the defective product will be manufactured which is having more loss than the cost of inspection.

So according to me these are  essential non value added activity which needs to be done in order to comply with regulatory or set standards.

Ans 2 Redundancy is not justified as inspection is an activity which needs to be carried so that we receive right component in first situation and in second situation do not produce defective product.

Ans 3 My responsibilty is to make them sure that their role is also imortnat in the process of production so need not worry that they will lose the jobs. I will mention that what type of activity you are doing and how it will help the organization.

Ans 4 The facts which we should consider that is this activity avoidable or not and is it important in the process of producing goods, will it help to give the product with right specification to customers. Will it be helpful to mainatain regulatory requirements. All the standard specification are met. So as per this what I should consider in report is to mention the importnace of inspection activities as essential non value added activities which should not affect the job of one or more employees.

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