Accounting · Management Accounting
The fundamental difference between Target Costing and Kaizen Costing in a Lean System is rooted in the timing and purpose of cost reduction activities. Which statement accurately captures this distinction?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Target Costing is a top-down management approach, whereas Kaizen Costing is a bottom-up engineering approach implemented by the R and D team.
- 2Kaizen Costing establishes a desired maximum cost for a new product, whereas Target Costing is a continuous improvement methodology focused on eliminating defects.
- 3Target Costing is used only for service industries, while Kaizen Costing is strictly applied to manufacturing processes.
- 4Target Costing focuses on cost reduction in the design stage to meet a market-driven price, while Kaizen Costing focuses on incremental cost reduction during the production stage.✓
Correct answer
Target Costing focuses on cost reduction in the design stage to meet a market-driven price, while Kaizen Costing focuses on incremental cost reduction during the production stage.
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