Question

Trend Reporting for Non-Value-Added Costs

Cicleta Manufacturing has four activities: receiving materials, assembly, expediting products, and storing goods. Receiving and assembly are necessary activities; expediting and storing goods are unnecessary. The following data pertain to the four activities for the year ending 20x1 (actual price per unit of the activity driver is assumed to be equal to the standard price):

Activity	Activity Driver	SQ	AQ	SP
Receiving	Receiving orders	12,000	21,000	$21
Assembly	Labor hours	87,000	105,000	15
Expediting	Orders expedited	0	7,000	50
Storing	Number of units	0	14,000	7

Assume that at the beginning of 20x2, Cicleta trained the assembly workers in a new approach that had the objective of increasing the efficiency of the assembly process. Cicleta also began moving toward a JIT purchasing and manufacturing system. When JIT is fully implemented, the demand for expediting is expected to be virtually eliminated. It is expected to take two to three years for full implementation. Assume that receiving cost is a step-fixed cost with steps of 1,500 orders. The other three activities employ resources that are acquired as used and needed. At the end of 20x2, the following results were reported for the four activities:

Activity	Activity Driver	SQ	AQ	SP
Receiving	Receiving orders	12,000	12,000	$21
Assembly	Labor hours	125,000	128,000	15
Expediting	Orders expedited	0	5,000	50
Storing	Number of units	0	10,000	7

Required:

Prepare a trend report that shows the non-value-added costs for each activity for 20x1 and 20x2 and the change in costs for the two periods. Enter all decreases as positive amounts and all increases as negative amounts. i.e. if 20x1 was 150,000 and 20x2 was 250,000 that would be an increase and would need to be entered as a negative amount. If an amount is zero, enter "0".

Cicleta Manufacturing
Trend Report: Non-Value-Added Costs
For the Years 20x1 and 20x2
Activity	20x1	20x2	Change
Receiving	$	$	$
Assembly
Expediting
Storing
Total	$	$	$

Answer 1

Non-Value added cost for an activity = (AQ - SQ) x SP

For the year ending 20x1:

Activity	Activity Driver	SQ	AQ	SP	Non value added costs = (AQ - SQ) x SP
Receiving	Receiving orders	12,000	21,000	21	189,000
Assembly	Labor hours	87,000	105,000	15	270,000
Expediting	Orders expedited	-	7,000	50	350,000
Storing	Number of units	-	14,000	7	98,000
Total					907,000

For the year ending 20x2:

Activity	Activity Driver	SQ	AQ	SP	Non value added costs = (AQ - SQ) x SP
Receiving	Receiving orders	12,000	12,000	21	-
Assembly	Labor hours	125,000	128,000	15	45,000
Expediting	Orders expedited	-	5,000	50	250,000
Storing	Number of units	-	10,000	7	70,000
Total					365,000

Hence, your final answer should look like as shown in the table below:

Cicleta Manufacturing
Trend Report: Non-Value-Added Costs
For the Years 20x1 and 20x2
Activity	20x1	20x2	Change
Receiving	189,000	-	189,000
Assembly	270,000	45,000	225,000
Expediting	350,000	250,000	100,000
Storing	98,000	70,000	28,000
Total	907,000	365,000	542,000