=+17-33 KK Lean accounting OBJECTIVE 8 Flexible Security Devices (FSD) has introduced a JIT production process and is considering the adoption of lean accounting principles to support its new production philosophy. The company has two product lines: mechanical devices and electronic devices.

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):

688 Chapter 17: Inventory management, just-in-time and simplified costing methods M17_HORN3377_02_LT_C17.indd 688 2/09/13 4:00 PM Mechanical devices Electronic devices Product A Product B Product C Product D Sales $630 $450 $810 $405 Direct materials (based on quantity used) 180 90 225 68 Direct manufacturing labour 135 68 180 55 Equipment costs 80 110 180 90 Allocated product-line overhead 100 55 110 45 Allocated plant-level overhead 45 30 70 20 Operating profit $90 $97 $45 $127