Managing Costs & Revenues

1. Managing Costs & Revenues Professor William F. O’Brien, MBA, CPA Spring 2010

2. Session 7 Lean Production Dairy Pak Case Graham Case

3. MALP • Strategic Implications of Mgt. Acctg. Systems • Quality choices can be affected • Cost is fundamental • Provides information on timeliness of production

4. Determinants Strategic Choices Cost Structure Environment -Structural Elements -Work Processes Management Accounting System Production Methods

5. Types of Production Methods • Craft • Mass Production • Lean Production (Flexible Mfg. System)

6. Structure Differences • Mass • Inflexible single purpose • High set-up time • Low labor skill level • Lean • Multi-use equipment • Low set-up time • Skilled labor force

7. Work Process Differences • Mass • Supervisory control • Precise control over supplier • Standardized products • Independent, sequential prod. develop. • Lean • Empowered workers • Cooperative relationship w/suppliers • Customer focused organization • Concurrent, integrated design

8. Cost Structure • Mass • Driven by volume • Allocation of fixed costs • Lean • Driven by process or activity

9. Mgt. Acctg. System in Lean Production • Driver focused • Value chain focused • Limited need for inventory reporting • Indirect cost orientation

10. Lean Prod--Attributes • Technical • Better decision relevance • Driver focused • External orientation • Cross functional & value chain focus • Better process understanding

11. MALP--Attributes, cont. • Behavioral • Team responsibility • Multiple motivation • Accountant as team player • Quality commitment • Global optimization • Risk of burnout

12. MALP--Attributes, cont. • Cultural • Team responsibility • Cooperation vs. competition • Focus on overall common good • Change in locus of power