Product Costing in Lean Manufacturing Organizations

Abstract

Lean manufacturing has been widely adopted by many organizations since the early 1990s. At the same time, the traditional accounting methods are almost obsolete with respect to Lean Manufacturing system. It fails to properly assess the operational improvements and therefore new cost management methods are needed to support the newly implemented lean manufacturing system. This paper discusses the drawbacks of traditional accounting methods used in companies that adopt Lean Manufacturing and presents two costing methods compatible with lean manufacturing organizations, Value Stream Costing (VSC) and features & characteristics costing which intended to cast light on the operational improvements achieved in organizations adopting lean manufacturing. Value Stream Costing appears to provide a bridge between operational views and financial views of lean, which enhances the transfer of information from shop level to management level.

Keywords: lean manufacturing, lean accounting, Activity-Based Costing, Value Stream Costing