Non-Value-Added Activities: Non-Value-Added Cost Thayne Company has 20 clerks th

Question

Non-Value-Added Activities: Non-Value-Added Cost

Thayne Company has 20 clerks that work in its Accounts Payable Department. A study revealed the following activities and the relative time demanded by each activity:

Required:

Classify the four activities as value-added or non-value-added, and calculate the clerical cost of each activity.

Activities Percentage of Clerical Time Comparing purchase orders and receiving orders and invoices 13%                    Resolving discrepancies among the three documents 73                       Preparing checks for suppliers 8                       Making journal entries and mailing checks 6                       The average salary of a clerk is $41,100.

Explanation / Answer

Total salary paid = 20*41100= $822000

Comparing documents Non-value-added $106860 Resolving discrepancies Non-value-added $600060 Preparing checks Value-added $65760 Mailing checks Value-added $49320

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