Estimate the nonvalue-added cost for each situation. a. A manual insertion process takes 30 minutes and 8 pounds of material to produce a product. Automating the insertion process requires 15 minutes of machine time and 7.5 pounds of material. The cost per labor hour is $12, the cost per machine hour is $8, and the cost per pound of materials is $10. $ per unit b. With its original design, a gear requires 8 hours of setup time. By redesigning the gear so that the number of different grooves needed is reduced by 50%, the setup time is reduced by 75%. The cost per setup hour is $50. $ per setup c. A product currently requires 6 moves. By redesigning the manufacturing layout, the number of moves can be reduced from 6 to 0. The cost per move is $20. $ per unit d. Inspection time for a plant is 16,000 hours per year.

Estimation of the non-value-added Cost:

a) Cost of automating the insertion process:

Machine time cost = 15/60 x $8 = $2

Material cost = 7.5 x $10 = $75

Total automation cost = $77

b) Cost of redesigning the gear:

Cost per setup hour = $50 x25% = $12.50

c) Movement cost:

Cost for movement = $20 x 6 = $120

d) Inspection cost:

Cost of inspection = 16,000 x $12 = $192,000

Explanation:

Non-Value Added activities, according to goleansixsigma.com, "are the process steps that do not meet one or more of the following criteria: 1) The step transforms the item toward completion (something changes).  2) The step is done right the first time (not a rework step).  3) The customer cares (or would pay) for the step to be done."

A non-value-added cost is a production expense that does not increase the amount customers are willing to pay for the finished product.  Examples are inspection cost, movement cost, and automation cost.

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