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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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