Question

which of the following activities would MOST LIKELY be classified as a non-value added activity in a factory that manufactures microwave ovens?

a. inserting glass shelves into the frames

b. storing finished goods

c. installing timing devices

d. conducting tests in line with ISO certification requirements

Answer 1

ANS-(B) STORING FINISHED GOODS

Raw materials are the direct materials you use to produce your products. However, raw materials in and of themselves do not add value to your products. The costs of purchasing, transporting and storing your raw materials are non-value-added activities. In addition, the time your employees spend moving the raw materials into your warehouse and entering each item into the inventory accounting program are non-value-added activities. Returning damaged or defective raw materials are additional non-value-added activities.

Taking raw materials out of storage and placing them on the production line is a value-added activity. Your employee’s direct labor on the production line is another value-added activity. However, inspection and quality control are non-valued-added activities. Inspecting the work in process or finished items do not add value to them. Reworking defective items are non-value-added activities. Moving defective items from the production line to the reworking station and back to the production line are non-value-added activities.

Inventory Storage

Transporting your finished goods from the production area into storage is a non-value-added activity, as are the costs of storing and warehousing your finished goods. Having too much inventory on hand may indicate a problem with estimating customer demand, and keeping inventory in storage for too long may reduce its value through obsolescence. Your customers may view your older inventory as inferior compared to what your competitor offers.