Non value added activity
|Non value added activity|
A non-value added activity is a work which does not increase the worth of delivered items to the customer. The process improvement of study tries to eliminate and looks for these activities. In this way, a business might reduce its costs by increasing the speed of its processes at the same time. For example, the process can include:
- approval step or
- a review which does not add value to the end product.
The efficiency of the organization is increased if this step might be eliminated or redesigned. Non-value added activities might contain a meaningful proportion of the work processes of an organization .
Examples of non-value added activities
Examples of non-value added activities contained in manufacturing operation are included in the following one:
- the moving of raw materials
- building maintenance,
- the repair of machines,
- finished and assemblies product within the factory,
- inventory control,
- building maintenance and
- the storage of inventory.
Nonvalue-added costs are costs which are caused either through the inefficient performance of:
- value-added activities or
- nonvalue-added activities.
Connected for nonvalue-added activities, cost of the nonvalue-added is the cost of the activity itself. Otherwise, for inefficient value-added activities, the cost of the activity has to be broken into its nonvalue-added and value-added components. For example, if receiving would use 20,000 receiving orders but uses of 30,000, then half of the cost of receiving is nonvalue-added and half is value-added.
The Valued-added Activity is one that has to be performed for the firm to stay in business. Some activities needed activities and are necessary to comply with legal mandates. The examples are activities required to comply with the registering requirements of the Securities and Exchange Commission and with the Internal Revenue Service to the filing requirements. These following activities are the value-added through mandate. Moreover, the remaining activities in the firm are discretionary. The discretionary activity is classified like the value-added provided it simultaneously satisfies in the three following conditions:
- the change of state was not achievable through preceding activities
- the activity produces the change of state, and
- the activity makes possible other activities to be performed.
- (M.M. Mowen, D.R. Hansen, D.L. Heitger 2011)
- (P.D. Kimmel, J.J. Weygandt, D.E. Kieso 2009)
- (M.M. Mowen, D.R. Hansen, D.L. Heitger 2008)
- Graban M., (2011)., Lean Hospitals: Imporving Quality, Patient Safety and Employee Satisfaction'', Crc Press
- Kimmel P.D., Weygandt J.J., Kieso D.E., (2009)., Accounting: Tools for Business Decision Making, John Wiley and Sons
- Mowen M.M., Hansen D.R., Heitger D.L., (2011)., Cornerstones of Managerial Accounting, Cengage Learning
- Mowen M.M., Hansen D.R., Heitger D.L., (2008)., Cornerstones of Managerial Accounting, Cengage Learnign
Author: Kaludia Święs