A time-and-motion study revealed that it should take 3 hours to produce a produc

Question

A time-and-motion study revealed that it should take 3 hours to produce a product that currently takes 7 hours to produce. Labor is $9 per hour.

a) The non-value-added costs are

Mason company keeps 20 days of materials inventory on hand to avoid shutdowns due to materials shortages. Carrying costs average $4,000 per day. Bach, Inc., a competitor, keeps 10 days of inventory on hand, and the competitor's carrying costs average $2,000 per day.

b) The value-added costs are (be sure to label each answer clearly and show all work)

Explanation / Answer

The value added costs are labor at $9 per hour. So if it should only take 3 hours ro produce the value added would be 9*3=$27 and the other 4*$9=36, since they are unnecessary.

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