# Nt1330 Case 5-4

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M18-15. Activity cost of converting raw materials into 50 fireplace inserts: Setup | \$ 65 | | Movement: | | | Batch (\$15 3 moves) | \$ 45 | | Weight (\$0.10 50 units 150 lbs. 3 moves) | 2,250 | 2,360 | Inspection (\$2 2 50) | | 200 | Drilling (\$4 5 50) | | 1,000 | Welding (\$4 80 50) | | 16,000 | Shaping (\$25 0.50 50) | | 625 | Assembly (\$17 1 50) | | 850 | Total | | \$21,035 | M18-16. Activity cost calculations: Machine setup cost = \$660,000 12,000 setup hours = \$55 per setup hour Material handling cost = \$100,000 2,000 tons = \$50 per ton of materials Machine operation = \$450,000 10,000 = \$45 per machine hour Product costs: | C23 Cams | | U2 Shafts | | | | | Direct materials | \$30,000 | | \$20,000 | Direct labor | 5,000 | | 10,000 | Manufacturing overhead: | | | | Machine setups (3 setup hours \$55) | 165 | (7 setup hours \$55) | 385 | Material handling (12.5 tons \$50) | 625 | (8 tons \$50) | 400 | Machine operation (4 hours \$45) | 180 | (5 machine hours \$45) | 225 | Total job costs | \$35,970 | | \$31,010 | Units produced…show more content…
The benefit of a successful Kaizen costing program is that the company operates more efficiently and with lower costs. When they do that, they should reward those who have helped to achieve the success. As a company succeeds with its Kaizen program it becomes more “lean” and able to be more competitive in the marketplace, and more profitable to its shareholders. The potential downside of Kaizen is that management uses it as a stick, rather than as a carrot to motivate managers and employees to lower costs. Also, if employees are not properly trained on the Kaizen philosophy, they will likely not be motivated to seek lasting ways to lower costs and improve processes, or they may pursue cost reductions that compromise