Approaches to Budgeting

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Kaizen budgeting

If your company uses Kaizen budgeting, cost reductions are built into the budget on an incremental basis so that continual efforts are made to reduce costs over a given time period. The advantage of Kaizen budgeting is that the budget process puts continuous pressure on managers to achieve cost efficiencies. A disadvantage is that Kaizen budgeting is difficult to maintain because the rate of budgeted cost reduction declines over time, making it more difficult to achieve improvements after the "easy" changes have been achieved.

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