Continuous Improvement (Kaizen) Costing

Assume that GE Capital, a division of

General Electric, has been displeased with the costs of servicing its consumer loans. Assume that it has decided to implement a Kaizen-based cost improvement program. For 2017, GE Capital incurred the following costs ($ millions):

Loan processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$10,850

Customer relations......................................................................2,100

Printing, mailing, and postage ...........................................................490

For the next two years, GE Capital expects an increase in consumer loans of 6 percent annually

with related increases in costs.

REQUIRED

a. If the company has a continuous improvement goal of 3 percent each year, develop a budget

for the next two years for the consumer loan department.

b. Identify some possible ways that GE Capital can achieve the Kaizen costing goal.

c. Discuss the potential benets and limitations of GEs Kaizen costing model.