Spring Manufacturing Company has had a continuous improvement (kaizen) program for the last two years According to the kaizen program, the firm is expected to manufacture C12 and D57 with the following specifications The company also anticipates the following changes Decrease in variable factory overhead 10 00 Decrase in total fixed overhead costs 5 00 Hourly wage rate, direct labor $30 00 Direct Materials Information RM1 RM2 RM3 Cost per pound $2 00 $2 50 $0 50 Estimated beginning inventory in pounds 3,000 1,500 1,000 Desired ending inventory in pounds 4,000 1,000 1,500 Income tax 40 Required 1 What is the budgeted after tax operating income if the firm can attain the expected operation level as prescribed by its kaizen program 2 What are the benefits of Spring Manufacturing Company adopting a continuous improvement program What are thelimitations D57 C12 Requirements for each finished component pound RM1 pounds pound 3 6 0 8 pound 2 RM2 RM3 pounds hours 1 8 Direct labor hours 1 5

Question: Spring Manufacturing Company has had a continuous improvement (kaizen) program for the last two years. According to the kaizen program, the firm is expected to

Spring Manufacturing Company has had a continuous improvement (kaizen) program for the last two years. According to the kaizen program, the firm is expected to manufacture C12 and D57 with the following specifications:

D57 C12 Requirements for each finished component: pound RM1 pounds pound 3.6 0.8 pound 2 RM2 RM3 pounds hours 1.8 Direct

The company also anticipates the following changes:
Decrease in variable factory overhead	10.00%
Decrase in total fixed overhead costs	5.00%
Hourly wage rate, direct labor	$30.00

Spring Manufacturing Company has had a continuous improvement (k

	Direct Materials Information
	RM1	RM2	RM3
Cost per pound	$2.00	$2.50	$0.50
Estimated beginning inventory in pounds	3,000	1,500	1,000
Desired ending inventory in pounds	4,000	1,000	1,500

Spring Manufacturing Company has had a continuous improvement (k

Income tax = 40%

Required

1. What is the budgeted after-tax operating income if the firm can attain the expected operation level as prescribed by its kaizen program?

2. What are the benefits of Spring Manufacturing Company adopting a continuous improvement program? What are thelimitations?

D57 C12 Requirements for each finished component: pound RM1 pounds pound 3.6 0.8 pound 2 RM2 RM3 pounds hours 1.8 Direct labor hours 1.5

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