Continuing from exercise 5.23, the financial controller of Data Processors recently attended an accounting conference which discussed the benefits of adopting kaizen budgeting within an activitybased budget. After meeting with operational managers at Data Processors, it was decided to instil a continuous improvement approach to operations by reducing the cost driver rate by 5 per cent in 2020 and a further 5 per cent in 2021.

Required

(a) Prepare the revised activity-based budget for 2020 and 2021.

(b) Are there potential behavioural consequences of adopting this kaizen approach to budgeting at Data Processors?

Exercise 5.23

Data Processors provides credit card services for the banking industry. It is preparing its budget for 2020 and, as it has been using activity-based costing, it intends to develop an activity-based budget for 2020. The table below provides the actual cost driver rate for 2019, and the expected activity levels for 2020.

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2020 Expected activity 2019 Actual Activity (cost driver) cost driver rate Non-business customers Business customers $0.40 Transaction processing (number of transactions) 5 000 000 20000 000 Statements (number of statements) 4.00 200 000 750 000 New credit cards (number of credit cards) 5.00 100 000 500 000 50 000 Billing disputes (number of disputes) 30.00 100 000