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Kaizen Costing Gordon Company produces custom-made machine parts. A setup activity is required for the batches of parts that it produces. Activity output is measured

Kaizen Costing Gordon Company produces custom-made machine parts. A setup activity is required for the batches of parts that it produces. Activity output is measured using setup hours. The value-added standard (SQ) for this activity is zero. On July 1, at the beginning of the fiscal year, 10 setup hours were allowed and used per batch. The standard wage rate for setup labor is $20 per setup hour. During the first quarter of the new fiscal year, the company is planning to implement a new setup method developed by Gordons industrial engineers that is expected to reduce setup time by 40 percent. The new procedure was implemented during the first quarter and the improvement expected was realized.

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