Managerial Accounting Task 5-10

(Group 4)
1. Non-Value Added Cost= (6-0)$20= $120 per unit
2. For the root cause, it’s using Plant Layout, which means constitutes
planning of the amount of space required for all kind of activities in an
industry, i.e., equipment, machinery, furniture and fittings, offices,
restrooms, warehouses, etc. It is a “Technique of locating different
machines and plant services within the factory so that the greatest
possible output of high quality at the lowest possible total cost can be
available”. The primary objective of plant layout is to minimize the
movement of men and materials in the plant. The principal objective of
a proper plant layout is to maximize the production at the minimum of
the costs. This objective should keep in mind while designing a layout
for a new plant as well as while making the necessary changes in the
existing layout in response to changes in management policies and
processes and techniques of production. Besides, it must satisfy the
needs of all people associated with the production system, i.e. workers,
supervisors, and managers. By reorganizing plant layout can reduce the
cost of moving materials.
3. For the cost reduction measures, it’s using the activity elimination which
it focuses on non-value-added activities. Once activities that fail to add
value are identified, measures must be taken to rid the organization of
these activities. For example, the activity of inspecting incoming parts
seems necessary to ensure that the product using the parts functions
according to specifications. Use of a bad part can produce a bad final
product. Selecting suppliers who are able to supply high-quality parts or
who are willing to improve their quality performance to achieve this
objective will eventually allow the elimination of incoming inspection.
Cost reduction then follows.

Managerial Accounting Task 5-15

(Group 4)
1. What kaizen setup standard would be used at the beginning of each
quarter?
On the first quarter setup time standard is 10 hours (15 hours – 5 hours: on
the planned improvement with the new process design), and on the second
quarter the setup time standard is 8 hours (9 hours – 1 hours: on the planned
improvement with the new process design)
2. Describe the kaizen subcycle using the two quarters of data
provided by Paulan!
The kaizen subcycle Paulan Motor Division
 Plan (5 hours reduction from process redesign/ “developed a new
process design that reduce the setup time from 15 hours to 10 hours”)
 Do (try the setup with the new process design)
 Check (the time required was 9 hours, 6 hours reduction/ “After
implementing the design, the actual setup time dropped from 15 to 9
hours)
 Act (lock in with 6 hours improvement by setting new standard of 9
hours and using same procedure as used to give the 9 hours outcome,
and simultaneously search for the new improvement opportunity, like
changes of the production worker)
Repeat kaizen subcycle Paula Motor Division:
 Plan (1-hour reduction from setup procedure changes)
 Do (train the workers and implement procedure)
 Check (actual time required was 6.5 hours, 2.5 hours reduction)
 Act (lock in improvement by setting standart of 6.5 hours, and begin
search for new improvement)

3. Describe the maintenance subcycle using the two quarters of data

provided by Paulan!
Maintenance subcycle Paulan Motor Division first quarter
 Establish standard (9 hours based on the improved process design)
 Do (implement repetitively the improved standard setup time)
 Check (see if the 9 hours time is maintained)
 Act (if the 9 hours time deteriorates, find out why and take corrective
action to restore to 7 hours)
Maintenance subcycle Paulan Motor Division second quarter
Same cycle using the 6.5 hours as the standard to maintain
4. How much non-value-added cost was eliminated by the end of two
quarters?
Nonvalue-added cost saved (eliminated): $100 x 8.5 = $850 per setup

5. How does kaizen costing differ from standard costing?

Kaizen, also known as continuous improvement, is a long-term approach to
work that systematically seeks to achieve small, incremental changes in
processes in order to improve efficiency and quality. Kaizen costing example.
The general idea of kaizen costing is to determine target costs, design product
and process to not exceed those costs, and finally - improve it to decrease
costs. Standard costing is the practice of substituting an expected cost for an
actual cost in the accounting records, and then periodically recording
variances showing the difference between the expected and actual costs.
Management uses these costs in two different ways. First, they use them to
plan out future production processes and increase efficiencies. By looking at
the present costs for operations, management can innovate new ways of
producing products that don’t require the same procedures–thus, reducing
cost.
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