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Vol.4 , No. 4, Publication Date: Aug. 23, 2017, Page: 56-59
![](https://www.facebook.com/dialog/feed?app_id=808315475849687&link=http://www.aascit.org/journal/archive2?journalId=917%26paperId=5058&redirect_uri=http://www.aascit.org/journal/archive2?journalId=917%26paperId=5058&display=popup&name=Profitability by Selling Below the Average Unit Cost: Lean Cost Accounting and a Real Application&description=Recent years, manufacturers are increasingly interested with lean thinking for several reasons, such as reduce costs, raise profits, cash flow and stock price, improve productivity, enhance flexibility and create better value for their customers. “Lean” philosophy, derived from Toyota Production Systems, was focused on minimizing seven wastes from the system. These are overproduction, unnecessary transportation, inventory, motion, defects, over-processing, and waiting. This philosophy is being implemented day by day with increasing number of firms. Manufacturers and academicians have developed new lean approaches as an implementation of “lean thinking”, such as lean production, lean management, lean cost accounting, etc. In this paper, lean cost accounting methods, value stream costing, calculating the profitability of an order using value stream costing, lean approach to decision making according to profitability of an order, and a Box Score to show strategic decision will be studied and discussed. Also how to profit by selling below unit cost will be showed with an application that had applied to a medium-sized hand tool manufacturer lean firm in Turkey. To the author’s knowledge, this will be the first accounting study which uses the lean philosophy - “lean cost accounting"&picture=http://www.aascit.org/aascit/decorators/img/journal/917.jpg)
| [1] | Yavuz Ozdemir, Department of Industrial Engineering, Yildiz Technical University, Istanbul, Turkey. |
Recent years, manufacturers are increasingly interested with lean thinking for several reasons, such as reduce costs, raise profits, cash flow and stock price, improve productivity, enhance flexibility and create better value for their customers. “Lean” philosophy, derived from Toyota Production Systems, was focused on minimizing seven wastes from the system. These are overproduction, unnecessary transportation, inventory, motion, defects, over-processing, and waiting. This philosophy is being implemented day by day with increasing number of firms. Manufacturers and academicians have developed new lean approaches as an implementation of “lean thinking”, such as lean production, lean management, lean cost accounting, etc. In this paper, lean cost accounting methods, value stream costing, calculating the profitability of an order using value stream costing, lean approach to decision making according to profitability of an order, and a Box Score to show strategic decision will be studied and discussed. Also how to profit by selling below unit cost will be showed with an application that had applied to a medium-sized hand tool manufacturer lean firm in Turkey. To the author’s knowledge, this will be the first accounting study which uses the lean philosophy - “lean cost accounting"
Keywords
Cost Accounting, Lean Philosophy, Lean Cost Accounting, Value Stream Costing, Box Score
Reference
| [01] | Ozdemir, Y., Durmusoglu, M. B. and Ozgurler, M. M. 2010. Lean Cost Accounting in a Lean Firm. Proceedings of the Xth International Scientific Conference- Management of XXI Century: Efficiency, Quality and Sustainable Development. Herzen State University, Nov. 24-25. |
| [02] | Fullerton, R. R., Kennedy, F. A. and Widener, S. K. 2013. Management Accounting and Control Practices in a Lean Manufacturing Environment. Accounting, Organizations and Society, 38:50-71. |
| [03] | The First Lean Service Summit, Netherlands, 2004, from: http://www.leanuk.org/events/previous-events/lean-summit-2004-the-first-lean-service-summit.aspx. |
| [04] | Gracanin, D., Buchmeister, B. and Lalic, B. 2014. Using Cost-Time Profile for Value Stream Optimization. Procedia Engineering, 69:1225-1231. |
| [05] | Mackle, K. and Darlington, J. 2007. Lean Accounting, from: http://www.leanenterprise.org.uk/index.php?option=com_docman&task=doc_download&gid=34 |
| [06] | Maskell, B. H. 2008. Lean Accounting, from: http://www.maskell.com/lean_accounting.html |
| [07] | Cunningham, J. E. and Fiume, O. J. 2003. Real numbers: Management Accounting in a Lean Organization, Managing Times Press, Durham, NC, 107. |
| [08] | Maskell, B. H. and Baggaley, B. 2004. Practical Lean Accounting: A Proven System for Measuring and Managing the Lean Enterprise, Productivity Press, USA. |
| [09] | Maskell, B. H. and Kennedy, F. A. 2007. Why Do We Need Lean Accounting and How Does It Work? Journal of Corporate Accounting & Finance, 18(3):59-73. |
| [10] | Johnson, H. T. 2007. Lean Dilemma: Choose System Principles or Management Accounting Controls-Not Both, in: Lean Accounting: Best Practices for Sustainable Integration (ed J. Stenzel), John Wiley & Sons Inc., Hoboken, USA, 3-16. |
| [11] | Maskell, B. H. and Katko, N. 2007. Value Stream Costing: The Lean Solution to Standard Costing Complexity and Waste, in:Lean Accounting: Best Practices for Sustainable Integration (ed J. Stenzel), John Wiley & Sons Inc., Hoboken, USA, 155-176. |
