Explain Kaizen costing

It is a Japanese method used to manage cost during a product s planning and design stages and has been used by some Japanese firms for over twenty years. It is now broadly used in Japan in such industries as electronic precision machinery and automobiles its objective is to decrease current costs by using various improvement tools like value engineering and functional analysis for each manufacturing facility. The term kaizen translates as continuous improvement".

A manager in the united states generally expects to use cost information to make decisions about pricing or investments while a Japanese manager expects to cost information to reduce costs.

Kaizen is the Japanese term for making improvements to a process through small incremental amounts rather through large cost innovations.

Kaizen costing is similar to target costing in its cost reduction mission except that it focuses on reducing cost during the manufacturing stage of the total life cycle of a product according to cooper and slagmulder (1999) kaizen costing is the primary disciplining technique of inter organization cost management during manufacture. The buyer's kaizen costing system establishes the supplier's selling prices. The suppliers then use their own kaizen costing system to identity where then are going to reduce cost and also to transmit the pressure to their supplies.