With its original design, a machine requires 14 hours of setup time.By redesigning the machine, the setup time is reduced by 30%.The cost per setup hour is $325.Calculate the reduction in the nonvalue-added cost per setup.
A) $1,365 per setup
B) $1,225 per setup
C) $450 per setup
D) $800 per setup
E) $2,025 per setup

Question

Quizplus · Accepted Answer

Reduction in nonvalue-added cost per setup = (Original setup time × Reduction percentage in setup time) × Cost per setup hour
(14 hours × 0.30) × $325 = $1,365 per setup

With Its Original Design, a Machine Requires 14 Hours of Setup