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Inspection time for a plant is 10,000 hours per year. The cost of inspection consists of salaries of four inspectors, totaling $60,000. Inspection also used supplies costing $3 per inspection hour. The company has a close to zero defect state and has eliminated the need for any inspection activity. Calculate the nonvalue-added cost of inspection per year.

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Answer:

$90,000

Explanation:

Inspection hours (h) = 10,000 hours per year

Total salaries (S) = $60,000

Cost of supplies (c) = $3 per inspection hour

Since there is no need for any inspection activity, all of the inspection costs qualify as nonvalue-added cost.

[tex]I = S+(h*c)\\I=\$60,000 +(10,000*\$3)\\I=\$90,000[/tex]

The nonvalue-added cost of inspection per year is $90,000

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