Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 62

High-Value-Added and Low-Value-Added Activities Mazon.com sells merchandise through orders placed on its Web site. Some of the firm’s activities are

a. Print order forms

b. Review orders to ensure the accuracy of prices and the totals

c. Secure approval of charges on credit cards

d. Deliver order forms to supervisor to secure her/his approval

e. Make a copy of each order to send to the warehouse

f. Pick and pack items ordered

g. E-mail customer for items not in stock

h. E-mail customer on the shipment of the order with a thank-you note Required Classify each item as a high-value-added or low-value-added activity.

Step 1 of 2

High-value-added activities are those activities which add something to the value of product and increases its overall value. Low-value-added activities are those activities which spend considerable amount of resource of the company but add very little to the value of the product.