Kaizen costing

Kaizen costing is a cost reduction system. Yashihuro Moden defines kaizen costing as "the maintenance of present cost levels for products currently being manufactured via systematic efforts to achieve the desired cost level." The word kaizen is a Japanese word meaning continuous improvement.

Moden has described two types of kaizen costing:

Kaizen costing is applied to products that are already in production phase. Prior to kaizen costing, when the products are under development phase, target costing is applied.

After targets have been set, they are continuously updated to display past improvements, and projected (expected) improvements.

Adopting Kaizen costing requires a change in the method of setting standards.

Kaizen costing focuses on "cost reduction" rather than "cost control".