The Mack Repair Shop repairs and services machine tools. A summary of its costs (by activity) for 2017 is as follows:

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Requirement 1. Classify each cost as value-added, non-value-added, or in the gray area between.

a.	Materials and labor for servicing machine tools	Value-added
b.	Rework costs	Non-value-added
c.	Expediting costs caused by work delays	Non-value-added
d.	Materials-handling costs	Gray area
e.	Materials-procurement and inspection costs	Gray area
f.	Preventive maintenance of equipment	Gray area
g.	Breakdown maintenance of equipment	Non-value-added

Requirement 2. For any cost classified in the gray area, assume 15% is value-added and 85%is non-value-added. How much of the total of all seven costs is value-added and how much is non-value-added?

Compute the total cost for the value-added and nonvalue-added costs, then compute what percentage of the total is value-added and how much is non-value-added.

		Total percent
	Total cost	of total costs
Value-added			%
Non-value-added			%
Total costs

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Data Table

a.	Materials and labor for servicing machine tools	$500,000
b.	Rework costs	150,000
c.	Expediting costs caused by work delays	75,000
d.	Materials-handling costs	50,000
e.	Materials-procurement and inspection costs	60,000
f.	Preventive maintenance of equipment	40,000