Refer to: Kaizen costing for Blade Runner.

The following cost reduction suggestions were made by the kaizen costing the team.

Direct materials - suppliers agreed to cost reductions of $4.50 for direct materials

Direct labour - an engineer suggested that the scooters could be manufactured more quickly if

production batches were cut in half. The engineer believes that a labor saving of $1.50 per scooter

could be attained.

Machining costs - the team has been unable to identify ways to reduce machining costs in the

manufacturing process, but suggests that some of the machining tasks could be outsourced to

suppliersso that some parts are pre-assembled, reducing the need for machine hours. This outsourcing

would increase the cost of direct materials by $0.50 per scooter but cut machining costs by $1.30 per

unit. The supplier has been very reliable, but does not currently have the machining expertise and

would have to purchase equipment and hire several workers to fill these orders.

Marketing - marketing has agreed to combine advertising campaigns for both products (regular and

motorised scooters) and believes they will save $2.50 per unit without losing sales.

Administration and engineering - no cost containment appears possible in administration because a

new enterprise resource programme was recently acquired. However, the head of engineering

believes that her costs can be cut by $4 per unit. She believes that some employees are no longer

needed because part of the new programme was designed especially to provide information for

product and manufacturing process design that had been manually collated in the past.

Required

a.

Calculate the new cost per category. Compare the total cost with the kaizen cost. Determine

whether further cost-containment efforts need to be made.

b.

In your own words, describe the next step in the kaizen process.

c.

List some qualitative factors that might be relevant to Blade Runner's managers as they decide

on any product or process changes. List as many factors as you can.

d.

For each of the planned cost reductions, discuss uncertainties about whether the entity will

achieve the planned cost reduction.