Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 26

Easy Clean operates a chain of dry cleaners. It is experimenting with a continuous improvement (i.e., kaizen) budget for operating expenses. Currently, a typical location has operating expenses of $10,000 per month. Plans are in place to achieve labor and utility savings. The associated operational changes are estimated to reduce monthly operating costs by a factor of 0.99 beginning in January. What is the estimated operating cost for January? For June? For December?

Step 1 of 2

Calculate the estimated operating costs:

Estimated operating cost can be calculated by multiplying the operating expenses with the operating costs by a factor.