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Lean accounting. Reliable Security Devices (RSD) has introduced a just-in-time production process and is considering the adoption of lean accounting principles to support its new production phi- losophy. The company has two product lines: Mechanical Devices and Electronic Devices. Two individual products are made in each line. Product-line manufacturing overhead costs are traced directly to product lines and then allocated to the two individual products in each line. The company's traditional cost account- ing system allocates all plant-level facility costs and some corporate overhead costs to individual products. The latest accounting report using traditional cost accounting methods included the following information (in thousands of dollars): Mechanical Devices Electronic Devices Product A Product B Product C Product D Sales $1,400 $1,000 $1,800 $900 150 Direct material (based on quantity used) Direct manufacturing labor Manufacturing overhead (equipment lease, supervision, production control) Allocated plant-level facility costs Design and marketing costs Allocated corporate overhead costs Operating income 400 200 500 300 150 400 120 180 240 400 190 100 80 160 60 190 100 210 84 30 20 40 16 $ 200 $ 210 $ 90 $280 RSD has determined that each of the two product lines represents a distinct value stream. It has also deter- mined that out of the $400,000 ($100,000 + $80,000 + $160,000 + $60,000) plant-level facility costs, prod- uct A occupies 22% of the plant's square footage, product B occupies 18%, product C occupies 36%, and product D occupies 14%. The remaining 10% of square footage is not being used. Finally, RSD has decided that in order to identify inefficiencies, direct material should be expensed in the period it is purchased, rather than when the material is used. According to purchasing records, direct material purchase costs during the period were as follows: Mechanical Devices Electronic Devices Product A Product B Product C Product D Direct material (purchases) $420 $240 $500 $180

Lean accounting. Reliable Security Devices (RSD) has introduced a just-in-time production process and is considering the adoption of lean accounting principles to support its new production phi- losophy. The company has two product lines: Mechanical Devices and Electronic Devices. Two individual products are made in each line. Product-line manufacturing overhead costs are traced directly to product lines and then allocated to the two individual products in each line. The company's traditional cost account- ing system allocates all plant-level facility costs and some corporate overhead costs to individual products. The latest accounting report using traditional cost accounting methods included the following information (in thousands of dollars): Mechanical Devices Electronic Devices Product A Product B Product C Product D Sales $1,400 $1,000 $1,800 $900 150 Direct material (based on quantity used) Direct manufacturing labor Manufacturing overhead (equipment lease, supervision, production control) Allocated plant-level facility costs Design and marketing costs Allocated corporate overhead costs Operating income 400 200 500 300 150 400 120 180 240 400 190 100 80 160 60 190 100 210 84 30 20 40 16 $ 200 $ 210 $ 90 $280 RSD has determined that each of the two product lines represents a distinct value stream. It has also deter- mined that out of the $400,000 ($100,000 + $80,000 + $160,000 + $60,000) plant-level facility costs, prod- uct A occupies 22% of the plant's square footage, product B occupies 18%, product C occupies 36%, and product D occupies 14%. The remaining 10% of square footage is not being used. Finally, RSD has decided that in order to identify inefficiencies, direct material should be expensed in the period it is purchased, rather than when the material is used. According to purchasing records, direct material purchase costs during the period were as follows: Mechanical Devices Electronic Devices Product A Product B Product C Product D Direct material (purchases) $420 $240 $500 $180

Financial And Managerial Accounting
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter18: Activity-based Costing
Section: Chapter Questions
Problem 3CMA: Young Company is beginning operations and is considering three alternatives to allocate...
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What are the cost objects in RSD’s lean accounting system?

Lean accounting. Reliable Security Devices (RSD) has introduced a just-in-time production process and is considering the adoption of lean accounting principles to support its new production phi- losophy. The company has two product lines: Mechanical Devices and Electronic Devices. Two individual products are made in each line. Product-line manufacturing overhead costs are traced directly to product lines and then allocated to the two individual products in each line. The company's traditional cost account- ing system allocates all plant-level facility costs and some corporate overhead costs to individual products. The latest accounting report using traditional cost accounting methods included the following information (in thousands of dollars): Mechanical Devices Electronic Devices Product A Product B Product C Product D Sales $1,400 $1,000 $1,800 $900 150 Direct material (based on quantity used) Direct manufacturing labor Manufacturing overhead (equipment lease, supervision, production control) Allocated plant-level facility costs Design and marketing costs Allocated corporate overhead costs Operating income 400 200 500 300 150 400 120 180 240 400 190 100 80 160 60 190 100 210 84 30 20 40 16 $ 200 $ 210 $ 90 $280
Transcribed Image Text:Lean accounting. Reliable Security Devices (RSD) has introduced a just-in-time production process and is considering the adoption of lean accounting principles to support its new production phi- losophy. The company has two product lines: Mechanical Devices and Electronic Devices. Two individual products are made in each line. Product-line manufacturing overhead costs are traced directly to product lines and then allocated to the two individual products in each line. The company's traditional cost account- ing system allocates all plant-level facility costs and some corporate overhead costs to individual products. The latest accounting report using traditional cost accounting methods included the following information (in thousands of dollars): Mechanical Devices Electronic Devices Product A Product B Product C Product D Sales $1,400 $1,000 $1,800 $900 150 Direct material (based on quantity used) Direct manufacturing labor Manufacturing overhead (equipment lease, supervision, production control) Allocated plant-level facility costs Design and marketing costs Allocated corporate overhead costs Operating income 400 200 500 300 150 400 120 180 240 400 190 100 80 160 60 190 100 210 84 30 20 40 16 $ 200 $ 210 $ 90 $280
RSD has determined that each of the two product lines represents a distinct value stream. It has also deter- mined that out of the $400,000 ($100,000 + $80,000 + $160,000 + $60,000) plant-level facility costs, prod- uct A occupies 22% of the plant's square footage, product B occupies 18%, product C occupies 36%, and product D occupies 14%. The remaining 10% of square footage is not being used. Finally, RSD has decided that in order to identify inefficiencies, direct material should be expensed in the period it is purchased, rather than when the material is used. According to purchasing records, direct material purchase costs during the period were as follows: Mechanical Devices Electronic Devices Product A Product B Product C Product D Direct material (purchases) $420 $240 $500 $180
Transcribed Image Text:RSD has determined that each of the two product lines represents a distinct value stream. It has also deter- mined that out of the $400,000 ($100,000 + $80,000 + $160,000 + $60,000) plant-level facility costs, prod- uct A occupies 22% of the plant's square footage, product B occupies 18%, product C occupies 36%, and product D occupies 14%. The remaining 10% of square footage is not being used. Finally, RSD has decided that in order to identify inefficiencies, direct material should be expensed in the period it is purchased, rather than when the material is used. According to purchasing records, direct material purchase costs during the period were as follows: Mechanical Devices Electronic Devices Product A Product B Product C Product D Direct material (purchases) $420 $240 $500 $180
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