Question

Kaizen costing refers to:

A. radical cost reductions during the design phase of a product.
B. radical cost reductions during the manufacturing phase of a product.
C. small, continual cost reductions during the design phase of a product.
D. small, continual cost reductions during the manufacturing phase of a product.
E. the use of operational costing in out-of-control manufacturing situations.

Answer 1

Kaizen costing refers to small, continual cost reductions during the manufacturing phase of a product, differing from economies of scale which lower costs as production increases.

Step-by-step explanation:

Kaizen costing refers to small, continual cost reductions during the manufacturing phase of a product. This concept is part of a broader cost management strategy aimed at improving a company's competitive advantage in the market. Unlike more radical cost-cutting measures that might take place during the design phase, Kaizen costing focuses on the continuous improvement of production processes to achieve efficiencies and lower costs over time. This approach can be contrasted with economies of scale, where increased production typically lowers the cost per unit. Understanding the differences between these strategies can help a firm determine the optimal scale of production and incorporate cost-savings methodologies effectively.