OFC Company (Exercise 10-48) has decided to implement a continuous improvements program to improve operational efficiency.

After a careful study, management and employees agree that the firm will be able to reduce cost rates for batch-level activities by 2 percent and unit-level activities by 1 percent per month during the first year of the program starting February 2010. The firm has decided to delay the implementation of the program for customer-sustaining and facility-level activities until 2011. The firm expects the amount of cost-driver usage in each of the next two months to be the same as those in January.

(Use 4 decimal points for all cost rates.)

Required

1. Identify unit-level and batch-level activities.

2. What are the total budgeted costs for each activity and for the division as a whole in February and March?

3. Identify three factors that are likely to be critical for a successful kaizen program.

4. What are primary criticisms regarding Kaizen budgeting?

 

Cost-reduction rate, batch-level activities =			2%	per month
Cost-reduction rate, unit-level activities =			1%	per month
			Monthly
		Activity Rates	Activity
	Activity	January	Volume
	Requisition handling	$12.50	30,000
	Pick packing	$1.50	800,000
	Data entry--lines	$0.80	800,000
	Data entry--requisitions	$1.20	30,000
	Desktop deliveries	$30.00	12,000