VALUE ADDED AND NON-VALUE ADDED ITEMS IN MBP 4
Institution’s Name
Value Added and Non-Value Added Items in MBP
In a business setting, there are different types of items thatinclude Value-Added (VA), Non-Value-Added (NVA), and BusinessValue-Added costs (Vanderbeck,2013). As a result, a business undertaking has a highlikelihood of incurring the three mentioned costs. In the same light,therefore, the MBP bears these items because it incurs differentcosts in the process of improving the tool control program. As such,this paper discusses the VA and NVA that appear in the improvementprocess.
Value-Added Items
The Cost of Direct Labor: The costincurred to obtain direct labor is one of the Value-Added costs. Someof the personnel employed to analyze the program and improve thetools are in this category.
Purchase of Tools: The cost that the companyundergoes to obtain new tools is classified as a Value-Added item.This argument is because the new tools add value to the G18 structureand functions. Understandably, new tools are expected to have betterperformance because they are more efficient.
Tool Storage Cost: The MBP focuses on the storage oftools used in the G18. The storage of these tools is termed as aValue-Added item because the access of the tools is a primaryrequirement. In other words, in case the operators do not access thetools, the functioning of the aircraft is not possible.
Non-Value Added Items
Maintenance cost: The maintenance of tools in agood working condition is a non-value added item. This classificationarises from the fact that maintenance just restores the originallevel of performance but does not increase it.
Tool Inspection and Replacement Cost: Inspection andreplacement of tools are also non-value added items since theyincrease the cost but the value of the items remains the same.
Repurchase of Missing Tools: The cost incurred whenlost tools are repurchased is classified as a non-value added item.Actually, repurchasing the lost tools does not increase the value ofthe process but it only reinstates the performance levels of theaircraft.
References
Vanderbeck,E. J. (2013). Principlesof cost accounting.Mason, OH: South-Western, Cengage Learning.
By