Lean Versus Traditional Production and Company’s Cost Essay Example
How lean versus traditional production might affect a management accountant trying to calculate a company’s costs. How would the information a management accountant would use to determine company costs change depending on type of production?
Gaurav Agnihotri
BU510
Module #2
March 8, 2013
.
TABLE OF CONTENTS CHAPTERS | | I. | Abstract…………………………………………………… | 3 | II. | Introduction……………………………………………… | 4 | III. | Company cost in traditional production system …………. | 5 | IV. | Company cost in lean production system ………………… | 7 | V. | Conclusion………………………………………………… | 8 | REFERENCES………………………………………………………………… | 9 |
Abstract
In this essay we will be looking closely on methods to calculate company cost for lean and traditional production system. Different methods used by management accountant to calculate company cost and information required to calculate cost. Moreover we will also weigh advantages and disadvantages of each cost process.
Introduction Most companies have experienced an increase competition over the past few decades. To be profitable it’s important for companies to determine the accurate cost of the products that they are manufacturing. In traditional production system traditional cost methods are applied. These methods are simple to use and cheaper to implement (Bianca). In the case of lean production system the best method to determine cost is Activity Based costing (ABC). Is more expensive to implement compared to traditional method but is more accurate and cost effective (Braun, Tietz, & Harrison, 2010).
Company’s cost in traditional production system
In traditional production system simple cost allocation is generally used (Braun, Tietz, & Harrison, 2010). The costing is calculated by accumulating the cost of direct material and direct labor used on the job as well as manufacturing overhead allocated to the job (Braun, Tietz, & Harrison, 2010). The indirect cost specially the
Gaurav Agnihotri
BU510
Module #2
March 8, 2013
.
TABLE OF CONTENTS CHAPTERS | | I. | Abstract…………………………………………………… | 3 | II. | Introduction……………………………………………… | 4 | III. | Company cost in traditional production system …………. | 5 | IV. | Company cost in lean production system ………………… | 7 | V. | Conclusion………………………………………………… | 8 | REFERENCES………………………………………………………………… | 9 |
Abstract
In this essay we will be looking closely on methods to calculate company cost for lean and traditional production system. Different methods used by management accountant to calculate company cost and information required to calculate cost. Moreover we will also weigh advantages and disadvantages of each cost process.
Introduction Most companies have experienced an increase competition over the past few decades. To be profitable it’s important for companies to determine the accurate cost of the products that they are manufacturing. In traditional production system traditional cost methods are applied. These methods are simple to use and cheaper to implement (Bianca). In the case of lean production system the best method to determine cost is Activity Based costing (ABC). Is more expensive to implement compared to traditional method but is more accurate and cost effective (Braun, Tietz, & Harrison, 2010).
Company’s cost in traditional production system
In traditional production system simple cost allocation is generally used (Braun, Tietz, & Harrison, 2010). The costing is calculated by accumulating the cost of direct material and direct labor used on the job as well as manufacturing overhead allocated to the job (Braun, Tietz, & Harrison, 2010). The indirect cost specially the