Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen

Exercise 23

Value-Stream Reporting with Inventory Decrease
Shorts Manufacturing, Inc., has implemented lean manufacturing in its Kansas City plant as a pilot program. One of its value streams produces a family of small electric tools. The value- stream team managers were quite excited about the results, as some of their efforts to eliminate waste were proving to be effective. During the most recent three weeks, the following data pertaining to the electric tool value stream were collected:
Week l:

Week 2:

Week 3:

Required:
1. Prepare a traditional income statement for each week.
2. Calculate the average value-stream product cost for each week. What does this cost signal, if anything?
3. Prepare a value-stream income statement for each week. Assume that any increase in inventory is valued at average cost. Comment on the financial performance of the value stream and its relationship to traditional income measurement.