Sarasota Company Value-Added Ratio Calculation

Calculation of Value-Added Ratio:

Sarasota Company manufactures pillows in 40-pillow batch sizes. The cutting time is 4 minutes per pillow and assembly time is 8 minutes per pillow. It takes 10 minutes to move a batch of pillows from cutting to assembly.

To compute the value-added ratio, we first need to determine the value-added lead time and non-value added lead time:

Value Added Lead Time:

Value added lead time = Cutting time + Assembly time = 4 minutes + 8 minutes = 12 minutes

Non-Value Added Lead Time:

Non-value added lead time = Move time = 10 minutes

Total Lead Time:

Total lead time = Value added lead time + Non-value added lead time = 12 minutes + 10 minutes = 22 minutes

Value-Added Ratio Calculation:

Value-added ratio = (Value added time / Total lead time) = (12 / 22) = 0.5454 = 54.5%

Therefore, the value-added ratio of Sarasota Company in manufacturing pillows is 54.5%.

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