ABSTRACT
Kaizen costing is a powerful cost management technique that focuses on the manufacturing stage of a product's life. It operates in feed-forward mode by setting cost-reduction objectives in anticipation of the need to reduce costs rather than reacting to cost overruns after they occur. There are three different types of kaizen costing programs—period-, item-, and overhead-specific. Each of these interventions has a different objective and focus. The objective of period-specific kaizen costing is to reduce the cost of production processes by a predetermined amount in the current period. In most firms, the level of this cost reduction is set to maintain the profitability of the firm. The objective of an item-specific kaizen costing intervention is to reduce the cost of a specific product so that it achieves its long-term profit objectives. Finally, overhead-specific kaizen costing has the objective of reducing overhead costs through programs aimed at reducing product-mix complexity.
