ACCTING 7014 Management Accounting : Improving the Performance of Mach

Kaizen is a Japanese word means good changing with continuous improvement. It is about small changes for the better over time rather than big changes and fast improvements. Kaizen budgeting covers the concept of continual improvement and applies it to budgets and budget predicting. Budget forecaster use Kaizen strategy to reduce cost of the product in the company. This helps management to find a new method of minimizing the expenses and reduce its budget so that same capital can be use in other important projects. This will definitely increases sales and profit of the organization.

Kaizen budgeting is differ from traditional budgeting in different way. Kaizen budgeting is budgeting which pay more attention on continuous improvement from a product perspective whereas traditional budget is the way of preparation of budget with taking last year’s budget as the base. The current year budget is prepared with making changes in last year budget by adjusting expenses based on market status, rate of inflation, customer demand etc. Kaizen budgeting let manager focuses on minimizing the expenses where as traditional budgeting encourage managers to spent all the budget before the year end, even if it is spent on silly expenses and risky investment. In kaizen budgeting there is an involvement of all staff like managers, accountant and supervisor to make a budget. On other hand, the decision is done by only top level management in traditional budgeting. In addition, the implementation of traditional budget is easy but the kaizen budgeting is difficult because it needs strong communication between staff.

How could Yosemit Ltd incorporate elements of Kaizen budgeting into its current budgeting process? Would recommend they do so and whay or why no?

The term Kaizen is the combination of two Japanese words that are ‘Kai’ that means change and the other word is ‘Zen’ that means good. It is a continuous process for making the improvements over some time period. This budget is a part of Master budget and demands for continuous improvement and therefore, incorporates the forecasted improvements into the budget (Pazarceviren, Akcin and Ozsuer 2015). Under the kaizen budgeting, the organization is under continuous pressure to decrease the cost of service or product the deal with. The reduction of cost involves four factors that must be implemented by the management. These are –

• Considering and accounting for the environment that is the competition and the market
• Generation of tighter linkages among the control and the budgeting for the current activity
• Integrating the skills of various functions of the organization
• Looking into the products from the aspect of the impacts of the current decisions on the future outcomes (Aris Machmud et al.2016).

Further, the kaizen method depends on the profitability objects that are implemented by the managers and it is implemented during the manufacturing process of the particular product. The Kaizen method includes the improvements in the production procedure through:

• Setting up the machines
• Optimizing the system of launch under the fabrication
• Motivation and formation of the staff
• Improving the performance of machines
• Encouraging the staffs those are charged with the identification for the possibilities of cost reduction

It is recommended that the Kaizen budgeting shall be implemented to focus on the improvements of performance and savings in cost. Further, it is integrated more deeply under the overall activities of the company.

Reference:

Aris Machmud, S.E., Ak, M.S. and Siti Rustiana Hamidah MSi, A., 2016, January. Enhancing Managerial Performance through Target Costing and Budget Participation. In International Conference on Accounting and Finance (AT). Proceedings (p. 18). Global Science and Technology Forum.

Pazarceviren, S.Y., Akcin, O. and Ozsuer, U., 2015. A Model Suggestion for Budgeting Activity Cost Reduction under Activity Based Kaizen Budgeting Approach. European Scientific Journal, ESJ, 11(10).