With the kaizen budgets, expectations on continuous improvement are incorporated with the budgeting process. The required amounts of resources are adjusted every time according to the desired levels of efficiency and productivity. Kaizen budgeting approach is much more effective when combined with activity-based budgeting technique. However, it should not be confused with traditional cost-cutting methods, in which the level of productive activities is decreased in cases of diminishing profits, decreasing sales, etc. Kaizen budgeting is related to performing the same activities with higher efficiency and higher quality. Managers may apply kaizen in both internal and external improvements. By decreasing the waste rates or increasing the capacity utilization rates internal improvements can be reached. On the other hand, many companies are arranging with their suppliers on providing improved quality with cheaper prices; so, they are decreasing their costs while increasing the quality by external improvements. As also understood from the information given, all of the statements in the options about the kaizen budgeting are correct, so the answer is E.