Question

During a recent accounting period, Falcon Express’ shipping department processed 26 orders. Each order typically takes four hours to complete. However, the average time increased to five hours because of various departmental inefficiencies. If shipping labor is paid $14 per hour, the company's non-value-added cost would be:

Answer 1

$364

Step-by-step explanation:

The orders processed by shipping department =26 orders

shipping labor cost = $14 per hour

Standard time to complete an order = 4 hours

Actual time to complete an order = 5 hours

Abnormal idle time per order due to departmental inefficiencies:

= (5 hours - 4 hours)

= 1 hour

Abnormal idle time for orders processed

= 26 orders × 1 hour per order

= 26 hours

Non-value-added cost:

= 26 hours × $14 per hr.

= $364