Answer (D) is correct . Analysis by activity provides for better cost control because of identification of nonvalue-adding activities. A value-added activity contributes to customer satisfaction or meets a need of the entity. A nonvalue-adding activity does not make such a contribution. It can be eliminated, reduced, or redesigned without impairing the quantity, quality, or responsiveness of the product or service desired by customers or the entity. For example, raw materials storage may be greatly reduced or eliminated in a just-in-time (JIT) production system without affecting customer value.
Answer (A) is incorrect because Design engineering activity adds value to products in the production process.
Answer (B) is incorrect because Heat treatment activity adds value to products in the production process.
Answer (C) is incorrect because Drill press activity adds value to products in the production process.
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