Larry Corporation has developed ideal standards for four activities: labour, materials, inspection, and receiving. Information is as follows:
$\begin{array}{llccc}
\underline{\text { Activity }} &\underline{ \text { Activity Driver }} & \underline{\text {S Q}} & \underline{\text {A Q}}&\underline{\text {SP}}\
\text { Inspection } & \text { Inspection hours } & 0 & 40,000&\$12 \
\text { Labour } & \text { Hours } & 50,000 & 56,000&18 \
\text { Materials } & \text { Kilograms } & 100,000 & 105,000 &15\
\text { Receiving } & \text { Orders } & 150 & 190&450
\end{array}$
The actual prices paid per unit of each activity driver were equal to the standard prices.
-Refer to the figure.What are the non-value-added costs for materials?
A)$1,575,000
B)$157,500
C)$150,000
D)$75,000

Question

Larry Corporation has developed ideal standards for four activities: labour, materials, inspection, and receiving. Information is as follows:
$\begin{array}{llccc}
\underline{\text { Activity }} &\underline{ \text { Activity Driver }} & \underline{\text {S Q}} & \underline{\text {A Q}}&\underline{\text {SP}}\
\text { Inspection } & \text { Inspection hours } & 0 & 40,000&\$12 \
\text { Labour } & \text { Hours } & 50,000 & 56,000&18 \
\text { Materials } & \text { Kilograms } & 100,000 & 105,000 &15\
\text { Receiving } & \text { Orders } & 150 & 190&450
\end{array}$
 The actual prices paid per unit of each activity driver were equal to the standard prices.
-Refer to the figure.What are the non-value-added costs for materials?
A)$1,575,000
B)$157,500
C)$150,000
D)$75,000

Quizplus · Accepted Answer

Non-value-added costs for materials are calculated as the cost of the quantity of materials that were used beyond the standard quantity required. The standard quantity (SQ) for materials is 100,000 kilograms, and the actual quantity (AQ) used is 105,000 kilograms. Therefore, the non-value-added quantity is 5,000 kilograms (105,000 - 100,000). Given the standard price (SP) of $15 per kilogram, the non-value-added cost for materials is 5,000 kilograms * $15/kg = $75,000.

Larry Corporation Has Developed Ideal Standards for Four Activities: Labour