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The modern business environment





                           Kaizen





                             Continuous improvement, or ‘Kaizen, is an integral part of the just-in-
                             time management philosophy. ‘Kaizen’ is a Japanese term meaning to
                             improve processes via small, incremental amounts rather than through
                             large innovations.


               Standard Costing concepts                      Kaizen Costing concepts

               Cost control system                            Cost reduction system.


               Assume current manufacturing conditions  Assume Continuous Improvement in
                                                              manufacturing.

               Meet cost performance standards                Achieve cost reduction targets.

               Standard costing techniques                    Kaizen costing techniques.


               Standards are set annually or semi-            Cost reduction targets are set and
               annually                                       applied monthly.

               Cost variance analysis involving standard  Continuous improvement (Kaizen) is
               costs and actual costs                         implemented during the year to attain
                                                              target profits or to reduce the gap
                                                              between target profit and estimated
                                                              profit.


               Investigate and respond when standards         Cost variance analysis involving target
               are not met                                    Kaizen costs and actual costs reduction
                                                              amounts.


                                                              Investigate and respond when target
                                                              Kaizen amounts are not attained.




                  Illustrations and further practice


                  Now attempt examples 4 and 5 ‘Kaizen Costing I’ and ‘Kaizen Costing II’ from
                  Chapter 2.





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