Mathematics · Operations Management

An Indian technology firm is using Lean principles for its software development process. The management is analyzing the cost reduction achieved versus the cost reduction planned for a new project, Project Orion, using Kaizen Costing. Statement 1: If the Planned Cost Reduction for Project Orion was 4,00,000 rupees, and the Actual Cost Reduction achieved was 5,00,000 rupees, the result is a Favorable Kaizen Variance of 1,00,000 rupees, indicating successful continuous improvement. Statement 2: The cost baseline for the Target Cost Reduction in Kaizen Costing is typically the Target Cost established in the design phase, and it is a fixed, non-changing benchmark. Statement 3: Kaizen Costing is primarily focused on process cost reduction and generally excludes costs related to marketing or research and development (R and D). Statement 4: The ultimate success of Kaizen Costing is measured not only by the cost reduction achieved but also by the sustained improvement in the key performance indicators (KPIs) like defect rates and lead time. Which of the above statements is/are correct?