Apply the Concepts, Cost Reporting

Medco Inc., a manufacturing firm, has four activities: purchasing materials, molding, inspecting molds, and grinding imperfect molds. Purchasing materials and molding are necessary activities; inspection and grinding are unnecessary. SQ provides the value$-$added quantity for each activity; AQ is the actual activity output. The following data pertain to the four activities for the year ending $($actual price per unit of the activity driver is assumed to be equal to the standard price$)$:

Activity Activity Driver SQ AQ SP

Purchasing Purchasing hours $28,00034,000$ $$20$

Molding Molding hours $42,00047,60012$

Inspecting Inspection hours $08,40015$

Grinding Number of units $06,0006$

Required:

$1.$ Prepare a cost report for the year $1$ ended that shows value$-$added costs, non$-$value$-$added costs, and total costs for each activity by completing the following table:

Value$-$and Non$-$Value$-$Added Cost Report for the Year $1$ Ended

Activity Value$-$Added

Costs Non$-$Value$-$Added Costs Total Costs

Purchasing $fill in the blank $2$d$2$d$2409$f$07203$b$\_1$ $fill in the blank $2$d$2$d$2409$f$07203$b$\_2$ $fill in the blank $2$d$2$d$2409$f$07203$b$\_3$

Molding fill in the blank $2$d$2$d$2409$f$07203$b$\_4$ fill in the blank $2$d$2$d$2409$f$07203$b$\_5$ fill in the blank $2$d$2$d$2409$f$07203$b$\_6$

Inspecting fill in the blank $2$d$2$d$2409$f$07203$b$\_7$ fill in the blank $2$d$2$d$2409$f$07203$b$\_8$ fill in the blank $2$d$2$d$2409$f$07203$b$\_9$

Grinding fill in the blank $2$d$2$d$2409$f$07203$b$\_10$ fill in the blank $2$d$2$d$2409$f$07203$b$\_11$ fill in the blank $2$d$2$d$2409$f$07203$b$\_12$

Total $fill in the blank $2$d$2$d$2409$f$07203$b$\_13$ $fill in the blank $2$d$2$d$2409$f$07203$b$\_14$ $fill in the blank $2$d$2$d$2409$f$07203$b$\_15$

$2.$ Inspection and grinding are non$-$value$-$added activities because inspection is a

activity and grinding is a

activity.

$3.$ Purchasing is a step$-$fixed cost with each step being $2,000$ hours. Suppose that the efficiency of purchasing is increased so that the demand for the purchasing activity is $31,000$ hours. What is the reduction in the cost achieved by the increased efficiency?

Reduction: $fill in the blank $2$d$2$d$2409$f$07203$b$\_18$