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:
- Asset and organisation specific kaizen costing activities planned according to the exegencies of each deal - Product model specific costing activities carried out in special projects with added emphasis on value analysis
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.
- Sani, Alireza Azimi; Mahdi Allahverdizadeh. "Target and Kaizen Costing" (PDF). World Academy of Science, Engineering and Technology 62 (10): 49. Retrieved 22 October 2012.