Solved

Garden Equipment Manufacturing Ltd

Question 99

Essay

Garden Equipment Manufacturing Ltd.(GEM)has introduced a just-in-time production process and is considering the adoption of lean accounting principles to support its new production philosophy.The company has two product lines: lawnmowers and weed whackers.Two individual products are made in each line.The company's traditional cost accounting system allocates all plant-level overhead costs to individual products.Product-line overhead costs are traced directly to product lines,and then allocated to the two individual products in each line.Equipment costs are directly traced to products.The latest accounting report using traditional cost accounting methods included the following information (in thousands of dollars).
Garden Equipment Manufacturing Ltd.(GEM)has introduced a just-in-time production process and is considering the adoption of lean accounting principles to support its new production philosophy.The company has two product lines: lawnmowers and weed whackers.Two individual products are made in each line.The company's traditional cost accounting system allocates all plant-level overhead costs to individual products.Product-line overhead costs are traced directly to product lines,and then allocated to the two individual products in each line.Equipment costs are directly traced to products.The latest accounting report using traditional cost accounting methods included the following information (in thousands of dollars). GEM has determined that each of the two product lines represents a distinct value stream.It has also determined that $90,000 of the allocated plant-level overhead costs represents plant occupancy costs associated with the products.Of this Product A occupies 30% of the plant's square footage,Product B occupies 30%,Product C occupies 20%,and Product D occupies 20%.The remaining square footage is occupied by plant administrative functions or is not being used.Finally GEM has determined that direct materials should be expensed in the period in which they are purchased,rather than when the material is used.According to purchasing records,direct material purchase costs during the year were: Required: a.What are the cost objects in GEM's lean accounting system? Which of GEM's costs would be excluded when computing operating income for these cost objects? b.Compute the operating income for the cost objects identified in requirement b.using lean accounting principles.Why does operating income differ from the operating income computed using traditional accounting methods? c.Which competitive strategy is best served by lean accounting principles?
GEM has determined that each of the two product lines represents a distinct value stream.It has also determined that $90,000 of the allocated plant-level overhead costs represents plant occupancy costs associated with the products.Of this Product A occupies 30% of the plant's square footage,Product B occupies 30%,Product C occupies 20%,and Product D occupies 20%.The remaining square footage is occupied by plant administrative functions or is not being used.Finally GEM has determined that direct materials should be expensed in the period in which they are purchased,rather than when the material is used.According to purchasing records,direct material purchase costs during the year were:
Garden Equipment Manufacturing Ltd.(GEM)has introduced a just-in-time production process and is considering the adoption of lean accounting principles to support its new production philosophy.The company has two product lines: lawnmowers and weed whackers.Two individual products are made in each line.The company's traditional cost accounting system allocates all plant-level overhead costs to individual products.Product-line overhead costs are traced directly to product lines,and then allocated to the two individual products in each line.Equipment costs are directly traced to products.The latest accounting report using traditional cost accounting methods included the following information (in thousands of dollars). GEM has determined that each of the two product lines represents a distinct value stream.It has also determined that $90,000 of the allocated plant-level overhead costs represents plant occupancy costs associated with the products.Of this Product A occupies 30% of the plant's square footage,Product B occupies 30%,Product C occupies 20%,and Product D occupies 20%.The remaining square footage is occupied by plant administrative functions or is not being used.Finally GEM has determined that direct materials should be expensed in the period in which they are purchased,rather than when the material is used.According to purchasing records,direct material purchase costs during the year were: Required: a.What are the cost objects in GEM's lean accounting system? Which of GEM's costs would be excluded when computing operating income for these cost objects? b.Compute the operating income for the cost objects identified in requirement b.using lean accounting principles.Why does operating income differ from the operating income computed using traditional accounting methods? c.Which competitive strategy is best served by lean accounting principles?
Required:
a.What are the cost objects in GEM's lean accounting system? Which of GEM's costs would be excluded when computing operating income for these cost objects?
b.Compute the operating income for the cost objects identified in requirement b.using lean accounting principles.Why does operating income differ from the operating income computed using traditional accounting methods?
c.Which competitive strategy is best served by lean accounting principles?

Correct Answer:

verifed

Verified

a.The cost objects are the two product l...

View Answer

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Q22: Answer the following question(s)using the information below:<br>The

Q55: Just-in-time purchasing is the purchase of goods

Q57: The executive vice president of Robotics, Inc.,

Q94: Dutch Oven is a bakery company.All processing

Q96: Answer the following question(s)using the information below:<br>Complete

Q97: The annual relevant carrying costs of inventory

Q104: An inventory item of XYZ Manufacturing has

Q108: A trigger point in backflush costing refers

Q136: Discuss considerations that should be fully taken

Q150: The annual demand for a company's product