Comprehensive Profit Plan (Kaizen Budgeting) (Use information in Problem 10-50 for Spring Manufacturing Company.) Spring Manufacturing Company has had a continuous improvement (kaizen) program for the last two years. According to the kaizen program, the firm is expected to manufacture C12 and D57 with the following specifications:

Cost Element	C12	D57
Raw material 1	9 pounds	7 pounds
Raw material 2	-0-	3.6 pounds
Raw material 3	1.8 pounds	0.8 pounds
Direct labor	1.5 hours	2 hours

The company specifies that the variable factory overhead is to decrease by 10% while the fixed factory overhead is to decrease by 5%, except for depreciation expenses. The company does not expect the price of the raw materials to change. However, the hourly wage rate is likely to be $30.

Required

What is the budgeted after-tax operating income if the company can attain the expected operation level as prescribed by its kaizen program?

What are the benefits of Spring Manufacturing Company adopting a continuous-improvement program? What are the limitations?