Chapter $8$ Activity$-$Based Management

Problem $8-19$ ABM, Kaizen Costing

Volante, Inc, supplies whecls for a large bicycle manufacturing company. The bicycie comps has recently requested that Volante decrease its delivery time, Volante made a commitrive to reduce the lead time for delivery from seven days to one day. To help achieve the engincering and production workers had made the commitment to reduce time for thes activity $($other activities such as moving materials and rework were also being examines simultancously$).$ Current setup times were $10$ hours. Setup cost was $$800$ per setup hout. Fr the first quarter, engineering developed a new process design that it believed would reduce the setup time from $10$ hours to eight hours. After implementing the design, the actual setup tins dropped from$-10$ hours to six hours. Engineering believed the actual reduction was sustainth In the second quarter, production workers suggested a new setup procedure. Engincerit? gave the suggestion a positive evaluation, and they projected that the new approach woald save an additional four hours of setup time. Setup labor was trained to perform the new stip procedures. The actual reduction in setup time based on the suggested changes was two howit.