# BMGT 321 Chapter 13 Homework / hwaid.com

## BMGT 321 Chapter 13 Homework / hwaid.com

BMGT 321 Chapter 13 Homework / hwaid.com

http://hwaid.com/shop/bmgt-321-chapter-13-homework/

Solutions to In Class Homework Assignments

The Magill Repair Shop repairs and services machine tools. A summary of its costs (by activity) for 2013 is as follows:

Required:
1. Classify each cost as value-added, non-value-added, or in the gray area between.
2. For any cost classified in the gray area, assume 60% is value-added and 40% is non-value-added. How much of the total of all seven costs is value-added and how much is non-value-added?
3. Magill is considering the following changes: (a) introducing quality-improvement programs whose net effect will be to reduce rework and expediting costs by 40% and materials and labor costs for servicing machine tools by 5%; (b) working with suppliers to reduce materials-procurement and inspection costs by 20% and materials-handling costs by 30%; and (c) increasing preventive-maintenance costs by 70% to reduce breakdown-maintenance costs by 50%. Calculate the effect of programs (a), (b), and (c) on value-added costs, non-value-added costs, and total costs. Comment briefly.
3. Effect on Costs Classified as

Area
(a) Quality improvement programs to
• reduce rework costs by 40% (0.40  \$90,000)
• reduce expediting costs by 40%
(0.40  \$65,000)
• reduce materials and labor costs by 5%
(0.05  \$1,100,000)
Total effect

–\$ 55,000
–\$ 55,000
–\$ 36,000

– 26,000

–\$ 62,000

(b) Working with suppliers to
• reduce materials procurement and inspection costs by 20% (0.20  \$45,000)
• reduce materials handling costs by 30%
(0.30  \$80,000)
Total effect
Transferring 60% of gray area costs (0.60 
\$33,000 = \$19,800) as value-added and 40%
(0.40  \$33,000 = \$13,200) as nonvalue-added