Rework, a nonvalue-added activity, is part of Breinholt Manufacturing's assembly process.

The products assembled contained a series of identical electrical components (purchased from suppliers—not produced internally). After assembly, the product was tested. Failure was almost always attributable to one or more of the series of electrical components. It was not uncommon for as many as three or four components in a single product to be defective.

At the end of 1999, Breinholt initiated efforts designed to buy higher quality components.

Consequently, the demand for the rework activity was expected to decrease. Data pertain¬

ing to the rework activity and the process of which it is a member are given below for the years 1999 and 2001.

Required:
1. Identify the process output measure and the activity output measure.
2. Calculate the productivity profile and the profit-linked measure for the rework activ¬
ity. Is reducing the demand for a nonvalue-added activity the correct decision? Does this benefit show up in the productivity measure? Explain.
3. Calculate the productivity profile and profit-linked measure of the assembly process where the output of the rework activity is viewed as a process input. Does this say any¬
thing about the value of reducing demand for a nonvalue-added activity?
4. Calculate the total process productivity change. What does this have to say about the actions taken regarding the nonvalue-added activity?

Transcribed Image Text:

1999 2001 Units assembled 100,000 100,000 Units reworked 2,500 1,200 Rework components (number) 5,000 2,400 Rework labor hours 4,000 2,000 Labor cost per hour $12 $15 Cost per component $20 $20 Activity rate $59 $64