Question

A one-month summary of manufacturing costs for Rapid Routers Company follows.

Direct materials $40,000
Direct labour 20,000
Material handling costs 1,500
Product inspection and rework 2,000
Materials purchasing and inspection 500
Routine maintenance and equipment servicing 1,200
Repair of equipment 300

Required:
Classify each cost as value-added or non-value-added

Answer 1

Cost Classification

Direct materials Value added

Direct labor Value added

Material handling costs Non-value added

Product inspection and rework Non-value added

Materials purchasing and inspection Value added

Routine maintenance and equipment Non-value added

servicing

Repair of equipment Non-value added