Topeka Plant Adopted In 1979 To Support Its Mass Production Process

Traditional Cost method is defined as “The traditional method of cost accounting refers to the allocation of manufacturing overhead costs to the products manufactured. The traditional method (also known as the conventional method) assigns or allocates the factory 's indirect costs to the items manufactured on the basis of volume such as the number of units produced, the direct labor hours, or the production machine hours. We will use machine hours in our discussion. By using only machine hours to allocate the manufacturing overhead to products, it is implying that the machine hours are the underlying cause of the factory overhead. Traditionally, that may have been reasonable or at least sufficient for the company 's external financial statements. However, in recent decades the manufacturing overhead has been driven or caused by many other factors. For example, some customers are likely to demand additional manufacturing operations for their diverse products. Other customers simply want great quantities of uniform products. If a manufacturer wants to know the true cost to produce specific products for specific customers, the traditional method of cost accounting is inadequate.” AccountingCoach. (n.d.).

Riordan Manufacturing, Inc. is an industry leader in the field of plastic injection molding. Using cutting edge art design capabilities, this Fortune 1000 Enterprise Company maintains facilities in San Jose, California, Albany, Georgia, Pontiac, Michigan and Hangzhou, China, and has annual earnings of $46 million. A company does not attain and maintain this type of success by accident. Part of Riordan’s success is due to its conversion accounting cycle. This paper will initially identify the five accounting cycles and explain how Riordan uses the conversion accounting cycle. Next, the strengths and weaknesses of the internal controls related to the conversion cycle

It is an advanced level of accounting that is targeted to reduce expenses and thus improve the overall look of the business at hand. However, in doing that, some processes that seem to be irrelevant in the manufacturing process on the financial statements are actually relevant in the process to correctly produce and manufacture certain items (Kennedy & Widener, 2008). Therefore, when a business takes in the lean accounting approaches advice, it may seem to work perfectly in the short-term but could have some big issues in the long-term. Conversely, the effects of the lean accounting approach really depend on the size of the business at hand and how much inventory is in question when it is implemented. The more inventory that is present in the business the more effective the lean accounting approach is because it exposes possible weaknesses within the manufacturing system and the bigger the inventory the more creditable the lean accounting is (Shah, 2003). So, it is not a perfect system but the bigger the amount of inventory that is present the more accurate the accounting method

Bhimani, A., Horngren, C., Datar, S., Rajan, M. et al. (2012) Management and Cost Accounting. 5th ed. Edinburgh: Prentice Hall, p.369 - 378.

From the aspect of cost center[1], tracking information of cost expenses would facilitate management to figure out the productivity by an unbiased measurement. In operations, company units such as the human resources department or marketing department, except sales department, are not engaging in market share or generating revenues. In contrast, these departments contribute their capabilities for internal supports and help sales department turn profits to the company. Those efforts are a part of product costs and also are a norm for performance evaluation.

Even though these techniques diverge in a number of key areas and it can be seen that TOC has several advantages. Lean sees an organization as a collection of parts and aims a local optimization system where TOC focuses on a local action with holistic optimization for the organization.

14-5: Are ABC and RCA Accounting Systems Compatible with Lean Management? by Larry Grasso, Management Accounting Quarterly, Vol. 7, No. 1 (Fall 2005), pp. 12-27.

The current method of apportioning production overheads based on direct labour hours can be described as a traditional approach to product costing. In a manufacturing company’s financial statements, each item produced must be allocated some of the production overheads to make the statements compliant. Sometimes the individual costs of these items can be calculated incorrectly based on overall production overhead and the system of allocating in place, however the overall financial statement can still be accurate. This traditional method of allocating the production

The first principle is ‘ Lean and Simple business Accounting’ .This principle is applying the lean technique to the accounting processes utilizing lean devices such as value stream ,maps ,kaizen ,problem-solving approach. The second principle alludes to accounting processes that support the lean transformation. ‘Clear and timely communication of information’ is the third principle of lean accounting. This tool is also broadly utilized for decision making purposes. ‘Planning from a lean perspective’ is another principle in lean accounting. At long last, Lean accounting must strengthen internal accounting control (Baggaleg and Maskell 2006). Based on(Maskell andKennedy 2007), the objectives of lean accounting are simple and have 4 objectives, 1. provide accurate, timely, and reasonable information to motivate lean transformation throughout the organization, and for decision making leading to expanded customer value, development, profitability, and income; 2. Use lean tools to eliminate waste from the accounting processes while maintaining thorough financial control; 3. Completely follow GAAP, external reporting regulations, and internal reporting requirements; and 4. Support the lean culture by motivating investment in people, providing information that is relevant and actionable and that empowers continuous improvement at each level of the

Lean accounting is the common term used for changes important to a company’s accounting, organizing, measurement and executive processes to keep up lean manufacturing and lean thinking. There are two main purposes for Lean accounting .The first is the utilization of lean methods to the company’s accounting control, and measurement processes. This is same than applying lean methods to some other processes. The goal is to eliminate waste, free up limit, speed up the procedure, wipe out mistakes and defects, and make the procedure clear and understandable. The second purposes of lean accounting is to on a very basic level change the accounting, control, and measurement forms so they motivate lean change and improvement, give data that is suitable for control and decision-making give a understanding of customer worth, effectively survey the financial impact of lean improvement, and are themselves simple, visual, and law-waste.Based on (Maskell andKennedy 2007), the objectives of lean accounting are simple and have 4 objectives, 1. provide accurate, timely, and reasonable information to motivate lean transformation throughout the organization, and for decision making leading to expanded customer value, development, profitability, and income; 2. Use lean

In reviewing the changes in management accounting techniques we must first look at what caused these changes. (Blocher, et al., 2009) outlines six major changes in the business environment over recent years. These include; an increase in global competition; lean manufacturing; advances in information

Lean is a conspicuous theory and application which expects the use of a wide range of assets for any reason, other than the production of significant worth for the end client to be inefficient, and subsequently an objective for prohibition. The theory and mindset communicated by an arrangement of standards, supplemented by various devices and systems helps for waste abolition, equipped execution change, stock diminishment, and ideal quality level to the end clients. It is one of the principal and far reaching ideas that add to organizations everywhere throughout the globe to increase upper hand and thrive on the global market. (Čiarnienė & Vienažindienė, 2015)

As globalization and technology bring the world together, management is forced to engage in strategies and calculated risk to remain competitive, allowing for organizational success through customer satisfaction. When executed correctly, lean manufacturing also known as lean thinking creates an atmosphere where competitive advantages and success is attainable. Due to the successful nature of this strategy, organizations other than manufacturing, have implemented lean thinking with a favorable outcome. Discussed below is the establishment of lean thinking, the steps of 5S, which is the tool utilized to lay the groundwork of lean thinking, and distinct differences between traditional cost accounting practices and lean accounting practices

This inventory network show ordinarily functions admirably for organizations with short-timeframe of realistic usability items, for example, dairy items and bread. It is additionally appropriate for makers of halfway items, for example, unique hardware producer (OEM) parts for gathering.

The Burns and Scapens framework for analyzing managerial accounting change was built on the study of old institutional economics, which sees "economics as a process of social provision, subject to multiple and cumulative causation." This view culminates in a model that argues that the managerial accounting practices at institutions are subject to a process of constant change, influenced by routines and rules. The institutions contribute to these routines and rules, but so do actions on the part of managers within the institutions. By combining multiple influences over time, we arrive at modern managerial accounting practice. In other words, Burns and Scapens tells us that managerial accounting practice changes over time, influenced by a number of factors including rules, routines and actions.