6 Flashcards
(42 cards)
What is the appetite for innovation in accounting?
Reflects the relevance of lean accounting and management accounting courses
Castellano and Burrows (2011) collected data from 352 faculties, highlighting the importance of topics like lean manufacturing and performance measurement.
Define Lean Management Accounting.
Restructuring of management accounting and controls to report results of improvements during a lean transformation
Traditional accounting systems often encourage batch processing and silo decision-making.
What does Lean Accounting aim to eliminate?
Wasteful activities from the accounting process
It simplifies activities and eliminates standard costing and associated variances.
How does Lean Accounting treat inventory?
As a liability and punishes its increase
What does Accounting for Lean focus on?
Value streams and requires information at that level
What are facility sustaining costs in Lean Accounting?
Costs not allocated to a specific value stream and shown separately in the income statement
What is the purpose of the ‘box score’ technique?
Uses simple focused visual information to present performance metrics
List some advantages of Lean Accounting.
- Saves resources previously used to collect detailed actual cost information
- Reduces the number of cost centres
- Reports actual data reflecting exactly what happened in the period
- Minimises cost allocation and associated complications
- Generates reports and information understandable by the staff working in the value stream
What limitations does Lean Accounting have?
- Requires companies to organise operations by value stream
- Early-stage lean companies may not establish value streams
- Requires low raw material and work in process inventory
- Does not calculate cost of each individual product but an average cost
In Lean Accounting, what determines pricing in profitability analysis?
Customer value determines the price, regardless of production cost
What does the Theory of Constraints state about cost accounting?
It can be seen as the number one enemy of productivity as a lot of focus on unit cost can miss the larger picture of the firms capability
What is throughput accounting focused on?
Throughput Accounting is a bottleneck-focused way of measuring profit that tells you, “Maximise the dollars flowing through the constraint, while keeping operating expense and inventory down.”
What are the three main components of the Lean system?
- Throughput (T)
- Inventory or Investment (I)
- Operating Expenses (OE)
Define throughput in Lean Accounting.
The rate at which the system produces the target output products or services
Revenue-TVC’s (totally vc)
What is treated as a period cost in Lean Accounting?
All expenses other than Totally Variable Costs (TVCs)
What is the priority order historically in accounting?
Operating Expenses (OE) > Investment (I) > Throughput (T)
How does throughput accounting invert priority?
Throughput (T) > Investment (I) > Operating Expenses (OE)
What is a bottleneck resource?
A binding constraint or limiting factor in the production process
How is safety stock used in a mass production approach?
Held downstream of a bottleneck to enable continued production if bottleneck capacity is lost
What is a binding constraint?
An activity with lower capacity than the preceding or following activities in a factory.
In a mass production approach, where is ‘safety stock’ typically held?
Downstream of a bottleneck.
How is production scaled back in a Lean environment?
Until the bottleneck is eliminated.
What is the bottleneck management process?
Maximising overall throughput by managing the bottleneck resource.
What does Key Factor Analysis help determine?
Which products to make when demand exceeds bottleneck capacity using value measures
