Performance Measurement for Cost Management: The Nature and Role of Kousuu

Abstract

The practices of target costing and kaizen costing have received considerable prominence as cost management methods which can support competitive strategies. However these techniques do require the support of internal cost information systems which provide both guidance and feedback on policies to effectively reduce resource consumption within the organisation. This paper explores the operation of just such a system-the kousuu reporting system. It involves the monitoring of resource use in the conversion cost area by profiling the various work times associated with component functions. This gives visibility to resource consumption, it supports the kaizen philosophy of beating previous actual performance by revealing time trends and facilitates cost management by integrating budgetary targets and ideas for improvement. As it is based on straightforward non-financial measures it provides a relatively unambiguous source of feedback which indicates the impact of previous decisions and guides future action on resource consumption and reduction.