Setup Time for a Product Is 12 Hours

question 3

Multiple Choice

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 labor is $6 per hour. The value-added costs are

• A)$72.
• B)$66.
• C)$12.
• D)$6.

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Definitions:

Straight-Line Depreciation

Method that allocates the depreciable cost of an asset in equal periodic amounts over its useful life

Book Value

The net value of a company's assets as found on its balance sheet, calculated by subtracting total liabilities from total assets.

Depreciable Asset

An asset that loses value over time due to wear and tear or obsolescence, and its cost is allocated over its useful life through depreciation.

Acquisition Cost

The total cost incurred to acquire an asset, including purchase price and any additional expenses necessary to get the asset ready for its intended use.