Teskor Pty Ltd manufactures paintbrushes at Lonsdale. The management accountant, Mary Malone, has developed an activity-based costing system for the company. The activities in the timber handle area are as follows:

From the cost assignment module in her ABC system, Malone knows that the activities 'Inspect handles' and 'Rework handles' are costly. She considers both to be non-value-added and therefore candidates for elimination.
Required:
1. Explain why the activities 'Inspect handles' and 'Rework handles' can be classified as non-value-added activities.
2. Suggest possible root cause cost drivers for these two activities.
3. Suggest possible performance measures for the activity Operate lathe which might help eliminate the activities 'Inspect handles' and 'Rework handles'.

Transcribed Image Text:

Activity Set up saw Description Saw set up to cut timber into designated lengths Timber cut into lengths Lathe set up to produce a designated handle shape Timber lengths shaped into handles Handles inspected to identify faults Faulty handles reworked Handles moved to assembly area Operate saw Set up lathe Operate lathe Inspect handles Rework handles Move handles