Lace Specialties manufactures, among other things, woolen blankets for the athletic teams of the two local high schools. The company sews the blankets from fabric and sews on a logo patch purchased from the licensed logo store site. The teams are as follows:

	Knights, with red blankets and the Knights logo
	Raiders, with black blankets and the Raider logo

Also, the black blankets are slightly larger than the red blankets.

Additional information follows:

The budgeted direct-cost inputs for each product in 2013 are as follows:

	Knights Blanket	Raiders Blanket
Red wool fabric	4 yards	0
Black wool fabric	0	5 yards
Knight logo patches	1	0
Raider Logo patches	0	1
Direct manufacturing labor	3 hours	4 hours

Unit data pertaining to the direct materials for March 2013 are as follows:

Actual Beginning Direct Materials Inventory (3/1/2013)
	Knights Blanket	Raiders Blanket
Red wool fabric	35 yards	0 yards
Black wool fabric	0	15
Knight logo patches	45	0
Raider Logo patches	0	60

Target Ending Direct Materials Inventory (3/1/2013)
	Knights Blanket	Raiders Blanket
Red wool fabric	25 yards	0 yards
Black wool fabric	0	25
Knight logo patches	25	0
Raider Logo patches	0	25

Unit cost data for direct-cost inputs pertaining to February 2013 and March 2013 are as follows:

	February 2013 (actual)	March 2013 (Budgeted)
Red wool fabric (per yard)	$9	$10
Black wool fabric (per yard)	12	11
Knight logo patches (per patch)	7	7
Raider Logo patches (per patch)	6	8
Manufacturing labor cost per hour	26	27

Manufacturing overhead (both variable and fixed) is allocated to each blanket on the basis of budgeted direct manufacturing labor-hours per blanket. The budgeted variable manufacturing overhead rate for March 2013 is $16 per direct manufacturing labor-hour. The budgeted fixed manufacturing overhead for March 2013 is $14,640. Both variable and fixed manufacturing overhead costs are allocated to each unit of finished goods. Data relating to finished goods inventory for March 2013 are as follows:

	Knights Blanket	Raiders Blanket
Beginning inventory in units	12	17
Beginning inventory in dollars (cost)	$1,440	$2,550
Target ending inventory in units	22	27

Budgeted sales for March 2013 are 130 units of the Knights blankets and 190 units of the Raiders blankets. The budgeted selling prices per unit in March 2013 are $229 for the Knights blankets and $296 for the Raiders blankets. Assume the following in your answer:

	Work-in-process inventories are negligible and ignored.
	Direct materials inventory and finished goods inventory are costed using the FIFO method.
	Unit costs of direct materials purchased and finished goods are constant in March 2013.

REQUIRED

1.	Suppose Lace Specialties decides to incorporate continuous improvement into its budgeting process. Describe two areas where it could incorporate continuous improvement into the budget schedules