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Kaizen

Kaizen costing is a continuous improvement technique aimed at reducing product costs and enhancing quality during the manufacturing process. It emphasizes incremental changes and the ongoing pursuit of perfection, distinguishing itself from radical approaches like business process re-engineering. This method is particularly beneficial for organizations focused on cost reduction and management accounting practices.

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4 views7 pages

Kaizen

Kaizen costing is a continuous improvement technique aimed at reducing product costs and enhancing quality during the manufacturing process. It emphasizes incremental changes and the ongoing pursuit of perfection, distinguishing itself from radical approaches like business process re-engineering. This method is particularly beneficial for organizations focused on cost reduction and management accounting practices.

Uploaded by

naveedurrehman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Kaizen Costing

A system of cost reduction via continuous improvement

The word kaizen is a Japanese word meaning


continuous improvement
Increase the gap between cost and
price
Cost reduction is inevitably crucial in any business as it
helps to increase profitability and set a competitive
price for your product or service
Aside from prioritizing the Return on Investment (ROI),
making internal improvements, and implementing
automation to increase product quality – an
organization can apply Kaizen costing to reduce the
manufacturing cost effectively
Kaizen Costing:
It is a costing technique to reflect continuous efforts to:
• reduce product costs,
• improve product quality,
• improve the production process after manufacturing activities have
begun
Kaizen costing involves making continual, incremental improvements to
the production process during the manufacturing phase of the
product/service lifecycle, typically involving setting targets for cost
reduction
Continuous Improvement:
Continuous improvement is the continual examination
and improvement of existing processes and is very
different from approaches such as business process re-
engineering (BPR), which seeks to make radical one-off
changes to improve an organization's operations and
processes
The concepts underlying continuous
improvement
a) The organization should always seek perfection.
Since perfection is never achieved, there must
always be scope for improving on the current
methods
b) The search for perfection should be ingrained into
the culture and mindset of all employees.
Improvements should be sought all the time
Kaizen Costing
Kaizen costing focuses on "cost reduction" rather than
"cost control"
Asset and organization specific kaizen costing activities
planned according to the needs of each deal
Prior to kaizen costing, when the products are under
development phase, target costing is applied. After targets
have been set, they are continuously updated to display
past improvements, and projected (expected)
improvements
Application of Kaizen Costing
• Companies who want to deploy cost reduction efforts as
a part of continuous policy during manufacturing stage
• Companies who wants to apply kaizen costing as a
method of continuous improvement through waste
management and cost reduction (or control)
• Companies where cost and management accounting is in
practice either as a statutory obligation or to support
management decision making process

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