Question

Please present your answer to the following problem in a clearly labeled table. Note that all tables and statements must have a three line title stating the company name, the type of table or statement, and, if applicable, the time period. E1-20B Lean production cost-benefit analysis (Learning Objective 5) Paradise Rides manufactures snowboards. Tom Posney, the CEO, is trying to decide whether to adopt a lean thinking model. He expects that adopting lean production would save S87,000 in warehousing expenses and $35,200 in spoilage costs. Adopting lean production will require several one-time up-front expenditures: $45,100 for an employee training program, $35,000 to streamline the plant's production process, and $7,750 to identify suppliers that will guarantee zero defects and on-time delivery. Requirements 1. What are the total costs of adopting lean production? 2. What are the total benefits of adopting lean production? 3. Should Paradise Rides adopt lean production? Why or why not?

Answer 1

1.

Employee training program	$45,100
Streamline of plant production process	35,000
Identifying suppliers	7,750
Total cost of adopting lean production	$87,850

2.

Savings in warehousing expenses	$87,000
Savings in spoilage cost	35,200
Total benefit of adopting lean production	$122,200

3.

As per above results, Paradise rides should adopt lean production as total benefits is more than total costs.