Target and kaizen costing, uncertainties, manager incentives Suppose you are having a conversation with Sandy,
another student in this course. Sandy is confused about the differences and similarities between target costing and
kaizen costing.
Another student, Kevin, overhears your conversation with Sandy and insists that neither of these methods is beneficial.
Kevin argues that some companies run into financial problems using these methods because their managers manipulated the
cost estimates to appear however they wanted. If the managers wanted to launch a new product or keep an old one, they
made sure their cost estimates supported their decision.
REQUIRE
D:
• A. In your own words, explain how target costing and kaizen costing are the same and how they are different.
• B. Compare the information needed to apply the target costing and kaizen costing methods:
1. List the types of relevant information needed for each method.
2. List the uncertainties in the relevant information for each method.
system.
• D. Kevin argues that the types of issues you described in part (C) mean that target and kaizen costing are not
beneficial. Discuss the validity of this argument.
