Kaizen approach to activity-based budgeting (continuation of 6-27). Family Supermarkets

(FS) has a Kaizen (continuous improvement) approach to budgeting monthly activity area costs for each month of 2009. 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 2009 rate). FS assumes that the budgeted amount of costdriver usage remains the same each month.

1, Jotal budgeted indirect cost for March 2009 $27,025 REQUIRED 1. What is the total budgeted cost for each activity and the total budgeted indirect cost for March 2009?

2. What are the benefits of using a Kaizen approach to budgeting? What are the limitations of this approach, and how might FS management overcome them?

LO1