Using the original design, a machine requires 12 hours of setup time. By redesigning the machine, the setup time is reduced by 25%. The cost per setup hour is $225. Calculate the reduction in nonvalue-added cost per setup.
A) $675 per setup
B) $225 per setup
C) $450 per setup
D) $800 per setup
E) $2,025

Question

Quizplus · Accepted Answer

The reduction in setup time is 25% of 12 hours, which equals 3 hours. At a cost of $225 per setup hour, the reduction in nonvalue-added cost per setup is 3 hours * $225/hour = $675.

Using the Original Design, a Machine Requires 12 Hours of Setup