Wartlow Electric Manufacturing Company introduced lean principles in 2018 and reported a successful implementation in 2021. Wartlow began with the implementation of lean principles and then adopted valuestream management (VSM) using the value-stream income statement. As expected, the use of VSM achieved better decision making (previously the firm had treated direct labour as a pure variable cost that varied with volume; after VSM it was clear that the behavior of labour costs was far more complex), reduced inventory, reduced cycle times and improved communication and coordination among employees. It was this latter result, better communication, that surprised Wartlow management, as employees began to work as teams that focused on the key success factors for the firm. The steps taken by Wartlow to implement lean included: Identify the main value streams of the company (Wartlow selected value streams consisting of 25- 150 employees each; more than 90% of the company’s employees were assigned to a value stream) Determine the key measures for achieving the company’s strategic goals (these included measures of quality, safety, on-time delivery and cost) The accounting system was adapted to VSM, including changes in the accounting for materials, labour and overhead. Required: Given the implementation of lean as described above, what do you see as the challenges ahead for Wartlow? Suggest some features of lean accounting that have yet to be implemented.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Wartlow Electric Manufacturing Company introduced lean principles in 2018 and reported a successful
implementation in 2021. Wartlow began with the implementation of lean principles and then adopted valuestream management (VSM) using the value-stream income statement. As expected, the use of VSM achieved
better decision making (previously the firm had treated direct labour as a pure variable cost that varied with
volume; after VSM it was clear that the behavior of labour costs was far more complex), reduced inventory,
reduced cycle times and improved communication and coordination among employees. It was this latter result,
better communication, that surprised Wartlow management, as employees began to work as teams that focused
on the key success factors for the firm.
The steps taken by Wartlow to implement lean included:
Identify the main value streams of the company (Wartlow selected value streams consisting of 25-
150 employees each; more than 90% of the company’s employees were assigned to a value stream)
Determine the key measures for achieving the company’s strategic goals (these included measures
of quality, safety, on-time delivery and cost)
The accounting system was adapted to VSM, including changes in the accounting for materials, labour
and overhead.
Required: Given the implementation of lean as described above, what do you see as the challenges ahead
for Wartlow? Suggest some features of lean accounting that have yet to be implemented.
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