Question

Non-Value-Added Activities: Non-Value-Added Cost

Thayne Company has 28 clerks that work in its Accounts Payable Department. A study revealed the following activities and the relative time demanded by each activity:

Activities	Percentage of Clerical Time
Comparing purchase orders and receiving orders and invoices	10%
Resolving discrepancies among the three documents	73
Preparing checks for suppliers	7
Making journal entries and mailing checks	10
The average salary of a clerk is $40,100.

Required:

Classify the four activities as value-added or non-value-added, and calculate the clerical cost of each activity.

Comparing documents		$fill in the blank 2
Resolving discrepancies		$fill in the blank 4
Preparing checks		$fill in the blank 6
Mailing checks		$fill in the blank 8

Answer 1

Activities	Classification	Value-added	Non Value-added
Comparing Documents($40,100*28*10%)	Non Value-added	$                                               -	$                                  112,280
Resolving Discrepancies($40,100*28*73%)	Non Value-added	$                                               -	$                                  819,644
Preparing Checks($40,100*28*7%)	Value-added	$                                       78,596	$                                           -
Mailing Checks($40,100*28*10%)	Value-added	$                                     112,280	$                                           -
Total		$                                     190,876	$                                  931,924