Bradford Company, a manufacturer of small tools, implemented lean manufacturing at the end of 2012. The company's goal for the year was to increase the ROS to 40 percent of sales. A value-stream team was established and began to work on lean improvements. During the year, the team was able to achieve significant results on several fronts. The Box Scorecard below reflects the performance measures at the beginning of the year, midyear, and end of year. Although the team members were pleased with their progress, they were disappointed in the financial results. They were still far from the targeted ROS of 40 percent. They were also puzzled as to why the improvements made did not translate into significantly improved financial performance.

Required:
1. From the scorecard, what was the focus of the value-stream team for the first six months? The second six months? What are the implications of these changes?
2. Using information from the scorecard, offer an explanation for why the financial results were not as good as expected.
3. Suppose that on December 31, 2013, a potential customer offered to purchase an order of goods that would increase weekly revenues in January by $100,000 and material cost by $30,000. Using the old standard cost system, the projected conversion cost of the order would be $60,000. Would you recommend that the order be accepted or rejected? Explain.

Transcribed Image Text:

January 1, 2013 June 30, 2013 December 31, 2013 Operational Revenue per person On-time delivery Dock-to-dock days First time through Average product cost S15,000 15 S60 S15,000 S15,000 95% 90% S59 Capacity Productive Nonproductive Available 40% 10% 50% 10% Financial Weekly sales Weekly material cost Weekly conversion cost Weekly value-stream profit ROS $800,000 S260,000 S300,000 S240,000 S800,000 S260,000 S300,000 S240,000 $800,000 S240,000 S300,000 S260,000 32.5%