Question
Willson Company has developed value-added standards for four activities: purchasing parts, assembling parts, administering parts, and inspecting parts. The activities, the activity driver, the standard
Willson Company has developed value-added standards for four activities: purchasing parts, assembling parts, administering parts, and inspecting parts. The activities, the activity driver, the standard and actual quantities, and the price standards follow for 2005: Activities Activity Driver SQ AQ SP Purchasing parts|Order|1,500|2,100| $300 Assembling parts Labor hours 180,000 199,500 12 Administering parts Number of parts 18,000 25,800 110 Inspecting parts Inspection hours 0 75,000 15 The actual prices paid per unit of each activity driver were equal to the standard prices.
Refer to Exercise 5-12. Suppose that Willson Company used an activity analysis pro- gram during 2006 in an effort to reduce non-value-added costs. The value-added standards, actual quantities, and prices for 2006 follow: Activities Activity Driver SQ AQ SP Purchasing parts Orders 1,500 1,800 $300 Assembling parts Labor hours 180,000 186,000 12 Administering parts Number of parts 18,000 24,000 110 Inspecting parts Inspection hours 0 45,000 15
Required Required 1. Prepare a cost report that lists the value-added costs, non-value-added costs, and actual costs for each activity. 2. Which activities are non-value-added? Explain why. Explain why value-added activities can have non-value-added costs. 3. Prepare a cost trend report that compares the non-value-added costs for 2005 with those of 2006. 4. Comment on the value of a trend report.
47681 [Don R 40 19% 07:27 47681 [Don R 40 19% 07:27
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