Nonvalue-Added Costs

Lemmons Inc. has the following two activities: (1) Retesting reworked products, cost: $484,000. The retesting cost of the most efficient competitor is $225,000. (2) Welding subassemblies, cost: $877,500 (67,500 welding hours). A benchmarking study reveals that the most efficient level for Lemmons would use 54,000 welding hours and entail a cost of $702,000.

Required:

Determine the nonvalue-added cost of each activity.

Retesting and Welding (Nonvalue-added cost:$)