Target Costing Samples Ppt

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					Lean Accounting
     Superfactory® Lean Enterprise Series

  1. Introduction
  2. What is Lean Accounting?
  3. Why Lean Accounting?
  4. Traditional vs. Lean Assumptions
  5. Implementing Lean Accounting
  6. Summary

                Applying lean concepts
      Lean      to drive waste out of the
   Accounting   accounting function

                Modifying the accounting
   Accounting   process to properly
    for Lean    deliver information which
                promotes lean behaviors
Comparing Assumptions
Traditional Assumptions     Lean Assumptions
  Profit comes from full    Profit comes from
   utilization of             maximizing flow on
   resources                  pull from customers
  Direct labor is the       Waste = resources
   most important             impeding the flow
   conversion cost
                             Control thru
  Control the business       continuous attention
   thru detailed tracking     to flow & waste
  All excess capacity is    Excess capacity
   bad                        provides flexibility
Comparing Measurements
Traditional Measurements   Lean Measurements
  Labor efficiency &       Cycle time
   machine utilization
                            Throughput
  Cost variance vs.
   standard                 First time quality
  Budget adherence         Inventory turns
  Direct labor as % of     Delivery to customer
                            Value stream focus
Lean Measurement
     Lean performance measurements drive and support lean

Strategic Issues        Strategic          Value Stream          Process
  Increase Cash         Measures            Measures             Measures
       Flow           Sales Growth       Sales per Person      Daily Production
 Increase Sales &      Cash from          On-time Delivery       WIP to SWIP
   Market Share        Operations
                                         First Time Through   First Time Through
   Continuous         Inventory Days
    Culture                              Average Cost per        Operational
  Improvement        On-time Delivery          Unit             Effectiveness
                        Customer             AR Days
                       Satisfaction         Outstanding
                    Sales per Employee
Lean Accounting
                                                                  Primary method of lean control
                                                      Performance for meeting customer needs and
                                                      Measurement driving continuous improvement

Simple, direct & accurate way
to create financial reports.
Very few transactions
                              Value Stream                                    Transaction
                                    Costing                                   Elimination

                                                                                            Save time, money & confusion
                                                                                            by radical elimination of
                                                        Lean                                wasteful transactions

                              Lean Decision
                                                                          Impact of Lean
  Manage the business by value                                                              Understand the financial
  streams with accountability for                                                           impact of lean improvement
  growth, profitability, and                             Target                             & create a money-making
  continuous improvement                                Costing                             strategy

                                              Drive the business from the
                                              customer value – not the cost
Lean Accounting
    Lean Accounting assumes profit is from maximizing flow on
    actual demand (pull signals) from customers, waste is any
    resource that impedes flow. Control is achieved through
    attention to flow and waste and excess capacity provides

  An early step to lean is to create a value stream map to identify all
   the specific actions to bring a specific product through the three
   critical tasks:
      Problem Solving: concept, design and launch
      Information Management: order taking, scheduling and delivery
      Physical Transformation: moving from raw material to finished item

    The team then prepares a cost analysis for calculating the
    cost of the value stream, which replaces the standard costing
    system. With this transition, value stream profitability and
    contribution margin become the basis for business decisions.

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