Page 188 - APM Integrated Workbook STUDENT S18-J19

Chapter 13

3.2 What is Kaizen costing?

Kaizen costing focuses on producing small, incremental cost
reductions throughout the production process through the product’s
life.

Steps:

These are Cost reduction
Target cost set totalled to give As production targets set
for each total target cost process regularly and
production for the first year improves, this variance
function during = baseline baseline is analysis carried
design phase. reduced.
figure. out.

A traditional standard costing system will be inappropriate since in this traditional
system:

 standards are fixed over a longer period

 standards are used to control, not reduce, costs

 employees are often seen as the source of problems rather than being
empowered to make changes.

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