Question:
1. Kaizen approach to activity-based budgeting Family Supermarkets IFS) has a kaizen (continuous improvement) approach to budgeting monthly activity costs for each month of 2008.
Each successive month, the budgeted cost-driver rate decreases by 0.2% relative to the preceding month (so, for example, February's budgeted cost-driver rate is 0.998 times January's budgeted cost-driver rate and March's budgeted cost-driver rate is 0.998 times the budgeted February 2008 rate). ES assumes that the budgeted amount of cost-driver usage remains the same each month. If you want to use Excel to solve this exercise, go to the Excel Lab at www.prenhall.com, horngren/costl3e and download the template for Exercise 6-24.
1. What is the total budgeted cost for each activity and the total budgeted indirect cost for March 2008?
2. What are the benefits of using a kaizen approach to budgeting? What are the limitations of this approach, and how might ES management overcome them?