Kenco Engineering Corporation: Strategy-Driven Costing and Lean Management

Abstract

This case illustrates a strategy-driven costing system combining ideas from lean management and the Theory of Constraints (TOC) to align performance measures and continuous improvement (CI) decisions with strategy. The primary theme is that a costing system can be integrated with and used to promote an organization’s strategies to maintain competitive advantage. This case demonstrates that cost accounting can be more than a full-cost allocation scheme. It can encourage adaptation in an unstable environment, for example, as Kenco uses accounting data to manage continuous improvement. A distinguishing feature of this case is the use of strategic cost drivers as more representative of cause and effect (investments in fixed costs) than operational activities that may only indirectly influence capacity costs. Where time is a problem, or students lack sufficient exposure, the instructor has presented some of the earlier questions as a lecture. Where preparation has been sufficient, the order of the questions is suggestive.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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Resources

Exhibit 1: Previous Production Process Layout

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Exhibit 2: New Conversion Processing Layout

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Exhibit 3: Bidding Sheet – Front End Loader Edges (FEL) A-36

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Exhibit 4: Weekly Production and Cost Report

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Exhibit 5: Weekly Performance Measures

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This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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