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30 October, 04:08

Flagler Corporation takes eight hours to complete the setup process for a certain electrical component, with the setup cost averaging $140 per hour. If the company's competitor can accomplish the same process in six hours, Flagler's non-value-added cost would be

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  1. 30 October, 07:22
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    Answer: $280

    Explanation:

    Non-Value Added Cost refers to the amount of cost incurred in the processing of a good that customers will not want to pay for because they believe that the whatever the cost was spent on did not add value to the good.

    This is not ideal because if customers do not pay for that cost then your profitability decreases.

    The cost can arise from a variety of ways but in this case it is the difference between the time taken to produce the electrical component by Flagler vs the Competition.

    The extra time taken by Flagler is considered a Non-Value added cost because Flagler will have to sell at the same price as their competitors to be able to get customers yet they spent more in making the component which will then not be translated to the selling price.

    The Non-Value added cost is the difference in time taken times their cost per hour.

    = 140 * (8 - 6)

    = $280

    Flagler's non-value-added cost would be $280
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