Management accounting systems tend to parallel the manufacturing systems they support and control. Traditional manufacturing systems emphasized productivity (average output per hour or per employee) and cost. This was the result of a competitive philosophy that was based on mass producing a few standard products and "meeting or beating competitors on price." If a firm is going to compete on price, it had better be a low-cost producer.

Firms achieved low unit cost for fixed set of resources by maximizing the utilization of those resources. That is, traditional production strategies, were based on the economies of mass production and maximizing output for a given productive capacity. The United States has experienced over 100 years of unprecedented economic prosperity in large part because innovators like Henry Ford applied these economic principles with a vengeance.

Competitors, never being completely satisfied with their present condition, were always looking for ways to lower the cost of a product or service even further to gain some temporary cost advantage. Additional productivity gains were achieved by standardizing work procedures, specializing work, and using machines to enhance the productivity of individual workers.

For this lab and discussion address the following:

1. Henry Ford made a now-famous statement that the Model T "could be had in any color as long as it was black." Explain what you think he meant by this statement. Please view the video on the following page: http://www.strategosinc.com/just_in_time.htm

2. Once understood, the economies of mass production were applied to most sectors of the American economy. Universities, hospitals and airlines are prime examples. Describe how the concepts of mass productions, standardization, and specialization have been applied to lower the costs of a college education

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