Consider the Following Two Activities: Performing Warranty Work and Purchasing

Multiple Choice

Consider the following two activities: performing warranty work and purchasing components. The warranty work costs $60,000, and the warranty cost of the most efficient competitor is $10,000. Purchasing components costs $100,000 (5,000 purchase orders) . A study reveals that the most efficient level would use 2,500 purchase orders and entail a cost of $55,000. What is the non-value-added cost?

A) $45,000
B) $55,000
C) $60,000
D) $105,000