BFA312 Management Accounting and Market Environment Factor

a)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.

b)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.

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

Kaizen budgeting is a constant procedure for improving the status of budget over a period of time.  The Kaizen budget is considered as part of the master budget and it demands for constant enhancement and tries to implement the expected development in the budget. The kaizen budget approach focuses on the profitability of the organization and therefore, is implemented through the specific product (Okoye, Egbunike and Meduoye 2013). It improves the process of production by:

• Making progress in the machine’s performance
• Staff’s formation and motivating them
• Machine set-up
• Optimizing the launching system of the fabrication.

Further, the organization are pressurised to reduce the cost under the Kaizen budgeting and thus they try to implement the budget through following four factors

• Taking into account the competition and market environment factor
• Considering the products from different angles for the impact of the present decisions on the future results
• Creating tighter connections between the budget and control system
• Integration of the skills of different activities of the organization (Kaur And Kaur 2013).

Therefore, it is recommended to implement the Kaizen budgeting system as it is integrated more deeply under the activities of the company. Further, through the traditional budget, it is not possible for the managers to compare the actual versus budget on monthly basis and make the necessary adjustments. However, under the Kaizen budgeting, the managers can improve the budget through continuous adjust and monitor which in turn, improves the overall profitability, productivity and efficiency of the organization’s operation.

Reference

Kaur, M. And Kaur, R., 2013. Kaizen Costing Technique A Literature Review. Clear International Journal of Research in Commerce & Management, 4(11).

Okoye, P.V.C., Egbunike, F.C. and Meduoye, O.M., 2013. Product cost management via the kaizen costing system: perception of Accountants. Journal of Management and Sustainability, 3(4), p.114.