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Problem - Novak, the partner in charge of a small accounting firm, has launched a kaizen costing program to reduce office support costs. She expects the program to reduce costs by at least 10%. Information for the first six months of the program and estimated cost savings for the next six months follows.
Actual Cost Last 6 Months
Estimated Cost Next 6 Months
Postage fees-deliver more reports and tax returns using fax; the company can make unlimited calls for a flat fee per month
$7,100
$6,600
Photocopy costs-outsource copy function to save labour cost
$3,100
$2,600
Labour costs-more efficient scheduling of support staff
$12,800
$12,300
Required -
1. Calculate the percent change in costs.
2. Determine whether the kaizen cost goal is likely to be met.
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