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

Exercise 50

Activity-Based Budgeting (ABB) with Continuous Improvements 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?

Step 1 of 2

2.

Schedule of budgeted costs