Cost Accounting Approaches: The Lean Success


Using the performance of Toyota during and after the economic crisis versus that of the “Big Three” US auto manufacturers, this case study presents the operational aspects and accounting tools underlying how a company adopts a cost accounting method. Toyota operates from a lean production system that is compared with and contrasted against the traditional production systems of US auto manufacturers. The case provides an overview of approaches to cost accounting: traditional, activity-based costing and lean, while introducing lean accounting tools to demonstrate their impact on performance analysis and decision making. By examining the analysis tools in traditional systems, such as the gross profit percentage and variance analysis, the case raises concerns about how such tools could be misleading. Lean accounting tools unveil significant hidden costs, which have a strong impact on performance analysis and decision-making.

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