Setup time for a product is 12 hours. A firm that uses JIT and produces the same product has reduced setup time to 1 hour. Setup labour is $6 per hour.
-Refer to the figure.What are the non-value-added costs?
A)$72
B)$66
C)$12
D)$6

Question

Quizplus · Accepted Answer

Non-value-added costs are those that do not add value to the product from the customer's perspective, such as excessive setup time. The original setup time was 12 hours at $6 per hour, totaling $72. With JIT, setup time reduced to 1 hour, costing $6. The reduction ($72 - $6 = $66) represents the non-value-added costs eliminated by the firm.

Setup Time for a Product Is 12 Hours