The Magrath Repair Shop repairs and services machine tools. A summary of its costs $($by activity$)$ for $2020$ is as follows:

Read the requirements.

Data table

a$.$ Materials and labor for servicing machine tools $$600,000$

b$.$ Rework costs $190,000$

c$.$ Expediting costs caused by work delays $,70,000$

d$.$ Materials$-$handling costs $,30,000$

e$.$ Materials$-$procurement and inspection costs $45,000$

f$.$ Preventive maintenance of equipment $25,000$

g$.$ Breakdown maintenance of equipment $80,000$

Requirements

Classify each cost as value$-$added, non$-$value$-$added, or in the gray area

between.

For any cost classified in the gray area, assume $24\%$ is value$-$added and $76\%$

is non$-$value$-$added. How much of the total of all seven costs is value$-$added

and how much is non$-$value$-$added?

Magrath is considering the following changes: $($a$)$

introducing quality$-$improvement programs whose net effect will be to reduce

rework and expediting costs by $50\%$ and materials and labor costs for

servicing machine tools by $5\%$; $($b$)$ working with suppliers to

reduce materials$-$procurement and inspection costs by $10\%$

and materials$-$handling costs by $20\%$; and $($c$)$

increasing preventive$-$maintenance costs by $50\%$ to

reduce breakdown$-$maintenance costs by $30\%.$ Calculate the effect of

programs $($a$),($b$),$ and $($c$)$ on value$-$added costs, non$-$value$-$added costs, and

total costs. Comment briefly.

$($a$)$ Quality improvement programs to:

reduce rework costs by $50\%$

reduce expediting costs by $50\%$

reduce materials and labor costs by $5\%$

Total effect