Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 17 - Activity-Based Costing - Questions: 17

Answer

Value added activities are those activities of an organization's operations, which increases the apparent worth of a service or a good. Example: In a manufacturing firm a product, include machining, assembly engineering, paining etc. Non-value added activities are those activities, which are eliminated, would not hinder the organization's operations, or reduce the apparent value of its service or good. Example is moving materials from one place to another place in process of work, finished goods, and time wastage like waiting at the time of manufacturing equipment to become available etc.

Work Step by Step

The benefit of categorizing activities as value-added versus non-value-added in an activity-based costing environment allows management to focus its efforts and resources on only those activities that add value, or perceived worth, to the product.
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