value-added activities
those activities necessary to remain in business are called value-added activities. some activities-requires activities-are necessary to comply with legal mandates. for example, rtp, inc., is a public company. all the activities that rtp must do to comply with the reporting requirements of the securities and exchange commission and the filing requirements of the internal revenue service are examples of mandated activities. these activities are value-added by man-date. the remaining activities in the firm are discretionary. a discretionary. a discretionary activities is classified as value-added provided it simultaneously satisfies three conditions (1) the activity produces a change of state, (2) the change of state was not achievable by preceding activities, and (3) the activity enables other activities to be performed.
for example, recall that rtp, inc., manufactures hydraulic cylinders, the first activity, cutting rods, cuts long rods into the correct lengths for the cylinders. next, the cut rods are welded to cut plates. the cutting-rod activity is value-added because (1) it causes a change of state-uncut rods become cut rods, (2) on prior activity was supposed to create this change of state, and (3) it enables the welding activity to be performed. though the value-added properties are easy to see for and operational activity like cutting rods, that about a more general activity like supervising production workers? a managerial activity is specifically designed to manage other value-added activity-to ensure that they are performed in an efficient and timely manner. supervision certainly satisfies the enabling condition. is other a change in state? there are two ways of answering in the affirmative. first, supervising can be viewed as an enabling resource that is consumed by the operational activities that do produce a change of state. thus, supervising is a secondary activity that serves as an input that is needed to help bring about the change of state expected for value-added primary activities. second, in could be argued that the supervision brings order by changing the state form uncoordinated activities to coordinated activities. once value-added activities are identified, we can define value-added costs. value-added costs are the costs to perform value-added activities with prefect efficiency