Accounting Q&A · Cost and Management Accounting · Topic 26
Try each question before revealing the answer.
25 short-answer questions. Try each question before revealing its answer.
Worked example
A value stream earns 80,000 and incurs 56,000 in directly assigned costs. Its operating result is 24,000 before shared costs. Separately track delivery time and capacity freed by process improvements.
Core concepts
1. What is lean accounting?
Management reporting that supports lean operations by making flow, value-stream performance and capacity visible.
2. What is a value stream?
The activities needed to deliver a family of products or services to customers.
3. What is value from a lean perspective?
A feature or outcome the customer needs or values.
4. What is waste?
Resource use that adds no customer value, such as avoidable waiting, defects or excess inventory.
5. What is value-stream costing?
Collecting costs by value stream to support decisions and performance reviews.
6. Why trace costs directly where practical?
Direct tracing shows which resources the stream uses and reduces arbitrary allocations.
7. How can shared costs be shown?
Show them separately or assign them on a supportable basis according to the report’s purpose.
8. What is a value-stream income statement?
A report showing revenue, assigned costs and operating result for a stream.
9. What is a box score?
A compact report combining operational, capacity and financial measures.
10. Name a flow measure.
Lead time, on-time delivery or work in process can show how smoothly work moves.
Worked applications
11. How does cycle time differ from lead time?
Cycle time describes a process or unit interval. Lead time includes elapsed time across the defined journey, including waits.
12. A stream has 60,000 revenue and 42,000 assigned costs. What is its result?
18,000 before separately reported shared costs.
13. What margin is that?
30% of revenue using the stated result.
14. Waiting falls from nine hours to six. What is the reduction?
Three hours, or one-third of the original wait.
15. A team frees 100 labour hours but keeps staffing unchanged. Is cash immediately saved?
The change frees capacity. Cash savings depend on whether spending changes or the hours generate another benefit.
16. What is productive capacity?
Available capacity used for work that produces the intended output.
17. What is available capacity in a box score?
Time or resources that can be used after productive and required non-productive work is accounted for.
18. Why avoid maximising every work centre’s utilisation?
It can increase queues and inventory without improving customer delivery.
19. What is pull production?
Release work in response to downstream demand rather than producing ahead without a signal.
Review and exam practice
20. Why can reducing inventory lower absorption profit temporarily?
Previously deferred fixed overhead may be released to cost of sales as inventory falls.
21. What is first-pass yield?
The proportion passing a process without rework.
22. Why pair speed and quality measures?
Faster processing can create more rework unless quality is tracked alongside it.
23. Can lean management reports replace statutory accounts?
Use management reports for internal decisions and reconcile them to the financial reporting requirements.
24. Why maintain a reconciliation to the ledger?
To explain scope, cost classification and inventory differences between reports.
25. What should a lean improvement review show?
Compare baseline and current flow, quality, capacity and financial effects using consistent definitions.