TREND REPORT, NON VALUE ADDED COSTS
Zurcher Company has developed value added standards for four activities: purchasing parts, receiving parts, moving parts, and setting up equipment. The activities, the activity drivers, the standard and actual quantities, and the price standards for 2006 are as follows: Suppose that for 2007, Zurcher Company has chosen suppliers that provide higher quality parts and redesigned its plant layout to reduce material movement. Additionally, Zurcher implemented a new setup procedure and provided training for its purchasing agents. As a consequence, less setup time is required and fewer purchasing mistakes are made. At the end of 2007, the following information is provided:
|
Activities |
Activity Driver |
SQ |
AQ |
SP |
|
Purchasing parts |
Purchase orders |
1,000 |
1,400 |
$150 |
|
Receiving parts |
Receiving orders |
2,000 |
3,000 |
100 |
|
Moving parts |
Number of moves |
0 |
1,000 |
200 |
|
Setting up equipment |
Setup hours |
0 |
4,000 |
60 |
The actual prices paid per unit of each activity driver were equal to the standard prices.
Suppose that for 2007, Zurcher Company has chosen suppliers that provide higher quality parts and redesigned its plant layout to reduce material movement. Additionally, Zurcher implemented a new setup procedure and provided training for its purchasing agents. As a consequence, less setup time is required and fewer purchasing mistakes are made. At the end of 2007, the following information is provided:
|
Activities |
Activity Driver |
SQ |
AQ |
SP |
|
Purchasing parts |
Purchase orders |
1,000 |
1,200 |
$150 |
|
Receiving parts |
Receiving orders |
2,000 |
2,400 |
100 |
|
Moving parts |
Number of moves |
0 |
400 |
200 |
|
Setting up equipment |
Setup hours |
0 |
1,000 |
60 |
Required:
1. Prepare a report that compares the non value added costs for 2007 with those of 2006.
2. What is the role of activity reduction for non value added activities? For valueadded activities?
3. Comment on the value of a trend report.