Question

In: Accounting

Value added activities are necessary to remain in business. Nonvalue added activities are defined in your...

Value added activities are necessary to remain in business. Nonvalue added activities are defined in your text as “All activities other than those that are absolutely essential to remain in business.” Describe for the class some examples of value added and nonvalue added activities that you observe in your workplace, or even your home or a business you frequent. What suggestions do you have on how to reduce the time or money spent on nonvalue added activities?

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Expert Solution

Value Added activities are those which add value to a business, process or product and for which customer is willing to pay. Value Added activities help in converting a product from a state of raw material to a finished product, in the least possible time, at minimum costs. In simple terms, value is something the customer is willing to pay for. Some examples of value added activities at a workplace are designing / assembling products, ordering raw materials, preparing plans, innovating, etc. Some examples of value added activities at home are buying groceries, cooking, painting the walls, etc

Non-Value Added activities are those which do not add any value to the product or service but are an inherent part of the process. Customers are not willing to pay for such services. These activities prove to be a burden on the organization and affect its efficiency. Some examples of non-value added activities at a workplace are waiting times, unnecessary movement of goods, rework due to defective manufacturing process or product, unnecessary paperwork/red-tape, idle machinery/equipment, backing up of computer data, etc Some examples of non value added activities at home are idle white goods lying around the house, vegetables turned rotten, uneaten food going waste, etc

The suggestions to reduce the time and money spent on nonvalue added activities are:

  • Eliminate waste as much as possible
  • Reduce waiting time
  • Reduce excess inventory
  • Replace outdated machinery that breaks down frequently
  • Focus on better quality and less rejections
  • Reduce over-processing
  • Streamline paperwork and flow of documents within the organisation
  • Cut down red tape
  • Repair defective items as soon as possible

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