Kaizen costing is a
cost reduction system used after a product's design has been completed and it is in production. Business professor
Yasuhiro Monden defines kaizen costing as
The Shogakukan Dictionary’s original definition of
Kaizen is translated as ''“The act or making bad points better”.'' In English, the more popular definition of Kaizen is “Change for Better”. Many believe that the Kaizen meaning is “continuous improvement” but, Kaizen is a result of continuous improvement. It exists at the employee’s level. The employee’s goal is to reach their potential, challenge the status quo and achieve continual improvement.
Prior to kaizen costing, when the products are under the development phase,
target costing is applied. After targets have been set, they are continuously updated to display past improvements and the projected (expected) improvements.
Monden has described two types of kaizen costing:
* Asset and organization-specific kaizen costing activities planned according to the exigencies of each deal
* Product model-specific
costing
Cost accounting is defined as "a systematic set of procedures for recording and reporting measurements of the cost of manufacturing goods and performing services in the aggregate and in detail. It includes methods for recognizing, classifying, al ...
activities carried out in special projects with added emphasis on
value analysis
Value engineering (VE) is a systematic analysis of the functions of various components and materials to lower the cost of goods, products and services with a tolerable loss of performance or functionality. Value, as defined, ...
Adopting kaizen costing requires a change in the method of setting standards.
Kaizen costing focuses on "cost reduction" rather than "cost control".
Types of cost under consideration
Kaizen costing takes into consideration costs related to the manufacturing stage, which include:
* Costs of
supply chain
* Legal costs
* Manufacturing costs
*
Waste
Waste (or wastes) are unwanted or unusable materials. Waste is any substance discarded after primary use, or is worthless, defective and of no use. A by-product, by contrast is a joint product of relatively minor economic value. A waste prod ...
* Recruitment costs
* Marketing, sales and distribution
* Product disposal
References
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External links
* Wawak S. (2016),
Kaizen costing', CEOpedia
Costs
Japanese business terms