Refer to Exercise 12-14. Suppose that for 2011, Gorman Company has chosen suppliers that provide higher-quality parts and redesigned its plant layout to reduce material movement.

Additionally, Gorman implemented a new setup procedure and provided training for its purchasing agents. As a consequence, less setup time is required and fewer purchasing mistakes are made. At the end of 2011, the following information is provided:

Required:
1. Prepare a report that compares the non-value-added costs for 2011 with those of 2010.
2. What is the role of activity reduction for non-value-added activities? For value-added activities?
3. Comment on the value ofa trend report.LO1

Transcribed Image Text:

Activities Activity Driver SQ AQ SP Purchasing parts Purchase orders 1,300 1,560 $200 Receiving parts Moving parts Receiving orders 3,380 4,056 130 Number of moves 420 260 Setting up equipment Setup hours 1,300 78