6-36 Budgeted costs, Kaizen improvements environmental costs. EverGreen Store, Singapore, manu- factures plain white and solid-colored T-shirts. Budgeted inputs include the following: Price Fabric $ 2 per meter Labor $ 20 per DMLH Dye $ 0.75 per ounce *For colored T-shirts only Quantity 0.75 meter per unit 0.25 DMLH per unit 4 ounces per unit Cost per unit of output $9 per unit $5 per unit $3 per unit Budgeted sales and selling price per unit are as follows: Budgeted Sales Selling Price per Unit White T-shirts 15,000 units $15 per T-shirt Colored T-shirts 60,000 units $18 per T-shirt EverGreen has the opportunity to switch from using its current dye to using an environmentally friendly dye that costs $1.50 per ounce. The company would still need 4 ounces of dye per shirt. EverGreen is reluc- tant to change because of the increase in costs and decrease in profit), but the Environmental Protection Agency has threatened to fine the company $140,000 if it continues to use the harmful but less expensive dye. 1. Given the preceding information, would EverGreen be better off financially by switching to the environ- mentally friendly dye? (Assume all other costs would remain the same.) 2. If EverGreen chooses to be environmentally responsible and switches to the new dye, the changes in the process will allow production managers to implement Kaizen costing. If it can reduce fabric and labor costs each by 1% per month on all the shirts it manufactures, at the end of 12 months how close will it be to the profit it would have earned before switching to a more expensive dye? (Round to the nearest dollar for calculating cost reductions.) 3. Refer to requirement 2. How could the reduction in material and labor costs be accomplished? Are there any problems with this plan