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Rich Novelty Company identified the following ctivities in its production and support operations. Classify each of these activities as either value-added or non-value added.

a. machine setup d. moving work in process
b. design engineering e. inspecting and testing
c. storing inventory f. painting and packing

Finney Inc. has conducted an analysis of overhead costs related to one of its product lines using a traditional costing system (volume-based) and an activity-based costing system. Here are its results.

Traditional Costing ABC

Sales Revenue $600,000 $600,000
Overhead costs:
Product RX3: $34,000 $50,000
Product Y12: $36,000 $20,000
_______ _______

$70,000 $70,000

How could a difference in the overhead costs between the two systems have occurred?

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Solution Summary

Rich Novelty Company identified the following ctivities in its production and support operations. Classify each of these activities as either value-added or non-value added.

--
Finney Inc. has conducted an analysis of overhead costs related to one of its product lines using a traditional costing system (volume-based) and an activity-based costing system. Here are its results.

Solution Preview

a. machine setup -- non value added
b. design engineering -- value added, assuming it's to the products and not the plant
c. storing inventory -- non value added
d. moving work in process -- value added
e. inspecting and testing -- value added
f. painting and ...

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