Compare the process costing and ABC results. Identify the products with overstated costs and those with understated costs. Explain why the costs are misstated under traditional process costing.
The activity-based costing shows the costs which have derived specifically from the activities driving it. This enabled the costing to be more precise. With the use of more precise costing, the manager would be able to identify the costs which are higher and thus use the bolts which have the lowest costs. In traditional costing, the costs were used for departments, which did not enable the manager to identify the costs on per bolts basis.
How could the Kota Mills manager use the ABC information to improve operations?
The manager of Kota Mills can use the Activity Based costing method to improve their operations. The company can select the bolts with higher contribution margin or less cost per bolts for the purpose of making its operations more profitable and better. It can be seen that the activity-based costing has enabled the manager to have the per bolt cost figures for each of the bolts. This was not possible in terms of the traditional costing method. Therefore, by using the activity-based costing method, the manager would be able to use the costs which are lower, hence, consequently increasing its profit and contribution margin. For instance, now the manager knows that the cost per bolt is even higher for the 16-ounce bolt, it is still using it. By using the least cost per bolt more for production, the manager can increase the contribution margin. The 13-ounce bolt has the lowest of the costs at $12.70. Both the 8- and 16-ounce bolts have higher costs per bolt.
Explain how lean thinking has been implemented and used.
In conventional business set ups, the manufacturers have been using the same products for years onwards and they have the same clients who ask for the same old products with little or no alterations. For instance, the manufacturers produce vehicles while the clients also ask for the vehicles, however, their real requirement is mobility. For the implementation of the lean thinking, the management first needs to identify the seven types of waste. This includes the waste of inventory, motion, over processing, transport, correction, and overproduction. Following this, the appropriate metrics for the measurement of productivity and the implementation of lean thinking are selected. The seven wastes and their causes need to be then identified.
Outline the benefits achieved by adopting lean thinking.
Lean management and thinking challenges this concept in which it needs management to constantly look for way to improve their products and reduce their waste. By using lean management techniques and thinking, the manufacturers can provide better mobility solutions to the clients. Therefore, lean thinking is a business plan which aims to offer a better and more effective manner of thinking to the management to use its business resources for the main aim of providing maximum value to its clients. Lean thinking is the opposite of mass production thinking. Lean thinking requires the management to have flexible response while mass production is more focused on the mass production. Lean thinking needs flow of value and not material. The customer pull is centered at lean thinking while the mass production is based on the producer push. The lean thinking mindset enables prevention while mass production is focused on inspection. Lean thinking is more knowledge driven and focuses on continuous improvement while it is opposite for the mass production mind set.
