Flagler Corporation takes eight hours to complete the setup process for a certain electrical component, with the setup cost averaging $150 per hour. If the company's competitor can accomplish the same process in six hours, Flagler's non-value-added cost would be:
A) $0.
B) $150.
C) $300.
D) $900.
E) $1,200.

Question

Quizplus · Accepted Answer

Non-value-added cost refers to the extra cost that does not add to the value of the product or service. In this case, Flagler Corporation takes 2 hours longer than its competitor (8 hours - 6 hours = 2 hours). Since the setup cost is $150 per hour, the non-value-added cost is 2 hours * $150/hour = $300.

Flagler Corporation Takes Eight Hours to Complete the Setup Process