RATIONALE OF THE STUDY

In todays business environment, continuous improvement is one of the many

concerns of the managers in an organization since they are subjected to a continuous
pressure in order to reduce the cost of the products or services they trade.
Understanding the tasks or activities that lead to the appearance of costs is extremely
useful in order to calculate and manage the product costs.
Kaizen, as defined by many of the authors is a Japanese concept and which
means a practice of continually improving processes and reducing cost. Basically, it
refers to the management philosophy (Akcin, Ozsuer, & Pazarceviren, 2015). A
strategy calls for never ending efforts for improvement (1000ventures.com). This was
founded and developed by Masaki Imai in Japan. This concept of kaizen tends to yield
gradual improvements over a long period of time and it can be applied to budgeting
by incorporating expected cost reductions into the planned results of a business
(accountingtools.com). It can also be used to create better products rather than being
used primarily to cut costs and focuses on improving slowly and continuously over
time than gigantic changes and fast improvements (myaccountingcourse). Kaizen
philosophy can be applied to any area of operations to continuously improve quality
standards and reduce cost (Ingram, D.). It brings improvements in time, cost, and
quality also bring benefits to the customer (Akcin, Ozsuer, & Pazarceviren, 2015).
Kaizen activities are assumed to increase customers satisfaction (Imai, 1999). The
concept of kaizen is very useful in business.
Kaizen budgeting is part of Kaizen Activity Based Management System and
Total Quality Control. This system is similar to a kind of contribution analysis based
on the direct costs. In this system, the distribution of indirect cost is not a concern

(Tanaka, 1994). It is a cost reduction method that enables companies to reduce their
variable costs and gain more efficient results (Akcin, Ozsuer, & Pazarceviren, 2015).
It is an approach that is based on continuous improvement in the budgeted figures
during the budget period (Horngern, 1997). Kaizen Budgeting contrasts with typical
budgeting, which focuses instead on project costs based on current practices and
methods. (Wright, T.C)
It is used widely in the companies of the other countries like Japan. Kaizen is
the heart of Lean manufacturing also known as the Toyota Production System
(1000ventures.com). The Toyota process requires that all tasks, both human and
mechanical, should be precisely defined and standardized to ensure the maximum
quality of the production, elimination of waste and improve efficiency just like all
mass-production systems. The members in the Toyota are responsible in seeking
continual improvement to the production and not only to the standardized work
guidelines. Toyota mentioned that the members are empowered with the ability to
improve their work environment. This includes everything from quality and safety to
the environment and productivity. Improvements and suggestions by team members
are the cornerstone of Toyotas success. Toyota benchmarks itself on efficiency
(Balasubramanyam, K.R, 2012). Although, kaizen is an integral part of corporate
culture of a Continuous Improvement Firm since it obliges consistency on both
conscious and sub-conscious thinking about improvements from everyone.
Because of the competitions that are getting stiffer in the organization the
manager or entrepreneur wishes to improve their operations for them to improve
every day and avoid being overtaken by their competitors. The problem is how to
look for an option that will have a significant impact but not exceed on the budget
allocated for such operation.

Fortunately, here in the Philippines, more and more of the firms are
discovering the proven method of Kaizen. The problem of kaizen budgeting is that it
is easier to achieve cost reduction in the first few years after that the percentage of
kaizen triggered cost reduction may decline also if the cost reductions cannot be
achieved, budgeted profits and cash flows may not even be achievable, thus, it will
result to a considerable unfavorable variances from the budget. In kaizen budgeting,
when company managers do not meet their budgeted cost reductions they analyze the
operating function or area in which they did not meet the goals. This analysis provides
information to the managers so that they can make adjustments in the budget or in the
process. Thus, kaizen budgeting has a ripple effect.
In Davao City, most of the small manufacturing enterprises are not aware what
Kaizen Budgeting is. Some of the manufacturing industry also practices this kind of
budgeting but the thing is that most of them dont know that they already applied
Kaizen budgeting as their strategy in planning. Since the world is changing rapidly, all
types of business industry must engage to a method that will boost their companys
competitiveness.
Since Kaizen Budgeting is adopted by world-class companies successfully it is
assured that the application of kaizen is effective thus this will help greatly help the
small manufacturing companies. This study aims to help the small manufacturing
enterprises and its accountant specifically in Davao City to give them an idea about
Kaizen Budgeting by determining their level of awareness about the concept of
Kaizen Budgeting and level of its applicability to the enterprises.

OBJECTIVE OF THE STUDY

This study aims to determine the correlation between level of awareness of
accountants and level of acceptability of Kaizen Budgeting among small
manufacturing enterprises in Davao City.
Specifically, this study sought to achieve the following objectives:
1. To determine the level of awareness of accountants in small manufacturing
enterprises into Kaizen Budgeting.
2. To determine the level of applicability of Kaizen Budgeting among small
manufacturing enterprises.
3. To determine the correlation between level of awareness and level of applicability.

STATEMENT OF HYPOTHESIS
The following null hypotheses of the study were tested:
H01: There is no significant difference in the level of awareness of accountants in
small manufacturing enterprises to Kaizen Budgeting.
H02: There is no significant difference in the level of applicability of Kaizen
Budgeting among small manufacturing enterprises.
H03: There is no significant relationship in the level of awareness and level of
applicability of Kaizen Budgeting among small manufacturing enterprises in
Davao City.

SIGNIFICANCE OF THE STUDY

The purpose of this study is to provide small manufacturing enterprises and its
accountants the idea about the Kaizen Budgeting by determining their level of
awareness about this budgeting and level of its applicability to the enterprises.
Specifically, the result of the study would be beneficial to the following:

Small Manufacturing Enterprises If it happens that the small manufacturing

enterprises are not aware of Kaizen Budgeting, this study will enable them to
know the concept of Kaizen budgeting and its importance. Hence, the small
manufacturing enterprises will gain an idea on how to improve their
production process. On the other hand, those that already engage in this kind
of budgeting will know if this kind of budgeting is really applicable for them

through or by looking from their performance.

Accountants It will help them to increase their awareness of Kaizen
budgeting. This study will inspire them to achieve higher level of knowledge
about the importance of budgeting other than Kaizen Budgeting that will help
them in their profession.

DEFINITION OF TERMS

Accountants - The main respondent of this study involved into Kaizen

budgeting employed in small manufacturing enterprises.

Correlation The relationship between the level of awareness and the level of

applicability of the Kaizen budgeting.

Kaizen Budgeting- It is the budgeting as used by the management in planning
being studied by the researcher conducted among small manufacturing
company with the accountants as their respondents.

Level of Applicability- It is level of how the company apply Kaizen budgeting

in their planning as used by the management.

Level of Awareness- It is the level of how aware and the knowledge of

accountants about Kaizen budgeting among their manufacturing industry.

Small Manufacturing Enterprises It is the industry where the study will be
conducted regarding the level of awareness and applicability about Kaizen
budgeting.

SCOPE AND LIMITATIONS

The Kaizen Budgeting shall mean as a concept wherein it focuses more on
improving slowly and continuously over time than gigantic changes and fast
improvements. Furthermore, the subject of this study is solely related to the level of
awareness and applicability of Kaizen Budgeting and its correlation to each other.
The parameter of this study shall be limited only to small manufacturing
enterprises located at Davao City area. In addition, the respondents of this study shall
be the accountants or firms that audit small manufacturing enterprises that being
studied. It will not tackle any issues and concerns that will involve other type of
industry in the country.

REFERENCES