Question

A manual process takes 18 minutes of direct labor time and six pounds of material to produce a product. Automating the process requires 12 minutes of machine time and 5 pounds of material. The cost per labor hour is $9, the cost per machine hour is $7, and the cost per pound of materials is $11.

Find the nonvalue - added cost for the above situation.

$2.40 per unit

$12.30 per unit

$9.00 per unit

$1.70 per unit

Answer 1

A manual process takes 18 minutes of direct labor time and six pounds of material to produce a product.
Direct labor (18 minutes = 18/60 hours = 0.3 hours) (0.3*$9)	$                 2.70
Material (6*$11)	$               66.00
Total Cost under the manual process	$               68.70
Automating the process requires 12 minutes of machine time and 5 pounds of material.
Machine cost (12 minutes = 12/60 hours = 0.2 hours) (0.2*$7)	$                 1.40
Material (5*$11)	$               55.00
Total Cost under the Automating process	$               56.40
Total Cost under the manual process	$               68.70
Total Cost under the Automating process	$               56.40
Nonvalue - added cost for the above situation	$               12.30
Find the nonvalue - added cost for the above situation.	$12.30 per unit