Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 39

Value-Stream Income Statement The Marshall Company is a large manufacturer of office fur­niture. The company has recently adopted lean accounting and has identified two value streams— office chairs and office tables. Total sales in the most recent period for the two streams are $245 and $310 million, respectively.

In the most recent accounting period, Marshall had the following operating costs, which were traced to the two value streams as follows (in thousands).

	Chairs	Tables
Operating costs:
Materials	$ 16,500	$14,500
Labor	123,000	96,500
Equipment-related costs	44,500	62,800
Occupancy costs	11,350	12,600

In addition to the traceable operating costs, the company had manufacturing costs of $116,750,0( and selling and administrative costs of $25 million that could not be traced to either value stream Due to the implementation of lean methods, the firm has been able to reduce inventory in both val streams significantly and has calculated the fixed cost of prior period inventory that is included the current income statement to be $5.5 million for the office chair stream and $22.5 million for t] office table stream.

Required Prepare the value stream income statement for Marshall Company.

Step 1 of 2

Management and Control of Quality

Quality is explained as a term associated with customer satisfaction. It is the total level of satisfaction any customer gets from any organization’s products or service. There are two components of quality- Design Quality and Performance Quality. There are various approaches to setting quality related expectations and among those alternatives one is the Cost of Quality (COQ) Reporting. It provides relevant cost and revenue data used for decision-making purposes.