Question

1. The Rupert store of Henderson Mart, a chain of small neighborhood convenience stores, has a Kaizen (continuous improvement) approach to budgeting monthly activity costs for each month of 2018. Henderson Mart has three product categories: soft drinks (35% of cost of goods sold [COGS]), fresh snacks (25% of COGS), and packaged food (40% of COGS). The following table shows the four activities that consume indirect resources at the Rupert store, the cost drivers and their rates, and the cost-driver amount budgeted to be consumed by each activity in January 2018. (Click the icon to view the four activities and their cost data.) 2(Click the icon to view additional cost driver information.) Read the requirements? Requirement 1. What are the total budgeted costs for each activity and the total budgeted indirect cost for March 2018? Begin by calculating the budgeted cost-driver rates for February, then calculate March. (Round your answers to five decimal places, X.XXXXX.) Activity Budgeted Cost-Driver Rates January February March $ 90.00 78.00 Ordering Delivery Shelf-stocking Customer support 24.00 0.22 Now calculate total budgeted cost for each activity and the total budgeted indirect cost for March. (Use the rates you calculated above in your calculations. Round your answers to the nearest whole number.) Soft Fresh Packaged Activity Drinks Snacks Food Total Ordering Delivery Shelf-stocking Customer support Total Requirement 2. What are the benefits of using a Kaizen approach to budgeting? What are the limitations of this approach, and how might Henderson Mart management overcome them? Begin by reviewing the following statements and then select whether each one is a benefit or limitation of a Kaizen approach to budgeting. A. It will show unfavorable variances for managers whose activities do not meet the required monthly cost reductions. This likely will (1) put more pressure on managers to creatively seek out cost reductions B. It assumes small incremental improvements each month. It is possible that some cost improvements arise from large (2) discontinuous changes C. Company takes into consideration employee suggestions. They believe that employees who actually do the job, whether in (3) manufacturing, sales, or distribution, have the best information and knowledge of how the job can be done better. For any limitations selected above, determine how Henderson Mart management might overcome them? (If a box is not

Answer 1

Requirement 1 Activity Ordering $ Delivery $ $ Budgeted Cost-Driver Rates January February March 90.0000 $ 89.6400 $ 89.2814 (90*0.996) (89.64*0.996) 78.0000 $ 77.6880 $ 77.3772 (78*0.996) (77.688*0.996) 24.0000 $ 23.9040 $ 23.8084 (24*0.996) (23.904*0.996) 0.2200 $ 0.2191 $ 0.2182 (0.22*0.996) (0.2191*0.996) Shelf-Stocking Customer support $ Activity Ordering Total 5,624.72 Delivery 7,428.21 shelf-Stocking Soft Drinks Fresh Snacks Packaged Food $ 1,517.78$ 2,589.16 $ 1,517.78$ (17*89.2814) (29*89.2814) (17*89.2814) $ 1,083.28 $ 4,797.39 $ 1,547.54 $ (14*77.3772) (62*77.3772) (20*77.3772) $ 523.78 $ 4,095.04 $ 2,190.37 $ (22*23.8084) (172*23.8084) (92*23.8084) $ 1,003.72 $ 7,593.36 $ 2,312.92 $ (4600*0.2182) (34800*0.2182) (10600*0.2182) $ 4,128.56 $ 19,074.95$ 7,568.61 $ 6,809.19 Customer support 10,910.00 Total 30,772.12 Requirement 2 Limitation A. It will show unfavorable variances for managers whose activities do not meet the required monthly cost reductions. Thid likely will put more pressure on managers to creatively seek out cost reductions. Limitation B. It assumes small incremental improvements each month. It is possible that some cost improvements arise from large discontinous changes. Benefit C. Company takes into consideration employee suggestions. They believe that employees who actually do the job, whether in manufacturing, sales, or distribution, have the best information and knowledge of how the job can be done better. Henderson Manager might overcome Limitation A by- Companies must relieve the pressure on managers by eliminating the monthly cost reduction requirements. Limitation B by- Companies need to highlight the importance of seeking large discontinous improvements as well as small incremental ones.