Narayana Rao K.V.S.S. on Cover Page of Business Today
Prof. Yasuhiro Monden and Prof. Kazuki Hamada explained the key points in Toyota’s Cost Management System in book entitled “Toyota Management System: Linking the Seven Key Functional Areas”.
In the text of the book the authors talk about the basics of Target Costing (Toyota calls it Genka Kikaku) and Kaizen Costing (Genka Kaizen). Toyota puts a lot of work into planning the cost and monitoring actual costs associated with a vehicle. Just as industrial engineers watch every second on the shop floor to identify waste, every dollar in a component is analyzed for improvement in vehicles as well. Accounting and measurement alone will not produce results. Measurement is just a piece of the improvement process just as “Check” is only a part of the Plan-Do-Check-Action cycle for improvement. A critical piece of Toyota’s strength in terms of financial results lies in the realm of the overall cost planning process and the structured VA, VE, & VI activities that occur during the life cycle of the program.
Kaizen costing is variant of standard costing. Standard costing specifies a cost target for the production team for the coming period. Normally standard cost is set for an year. It will be revised every year. It is constant for an year as a planning device. Any variances from it are examined and the reasons are identified and understood.
For More Detailed Reading
Control Measures for Kaizen Costing – Formulation and Practical Use of the Half-Life Model
Introduction to Kaizen Budgeting
Included in Knol Handbook of Industrial Engineering – 2019
Index of articles on Cost Accounting, Costing and Cost Management
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Updated on 8 May 2019, 27 January 2012