Value and Non value Added Cost Reporting
Reducing non-value-added costs is one way to increase activity efficiency A company's accounting system should distinguish between value-added costs and non-value-added costs because improving activity performance requires eliminating non-value-added activities and optimizing value-added activities. Hence, a firm shold identify and formally report the value-added and non-value-added costs of each activity. Highlighting non-value-added costs reveals the magnitude of the waste the company is currently experiencing, thus providing some information about the potential for improvement. Thus providing some information about the potential for improvement.