Final answer:
The assertion that Kaizen budgeting allows for small incremental increases in costs each period to account for inflation is FALSE. Kaizen budgeting aims for continuous improvement and cost reductions, contrasting with merely adjusting for inflation.
Step-by-step explanation:
The statement is FALSE. Kaizen budgeting is a concept that does not simply allow for incremental increases in costs to account for normal inflation. Instead, Kaizen budgeting focuses on continuous improvement and cost reduction through efficiency and waste elimination.
he budgeting approach aims to reflect ongoing cost savings as a result of process improvements, rather than simply adjusting for inflation. In effect, it is more dynamic and involves constant re-evaluation of processes and expenses with the objective of incremental and continuous improvements.
In comparison, traditional budgeting may involve adjustments for anticipated costs increases due to inflation, but Kaizen budgeting actively seeks ways to counter these increases through better practices and efficiencies.
This is why the budget constraint framework is relevant, reminding us to consider the full range of effects from changes in income or price, which can be crucial for businesses practicing Kaizen budgeting. They must continuously adapt and restructure their budget constraints to align with their ongoing process improvement goals.