Dissertation Archive, WMU Graduate College

Dissertation Defense

Candidate: David Meade

Degree of: Doctor of Philosophy

Department: Industrial and Manufacturing Engineering

Title: System's Approach to Modeling the Strategic Impact of Management Accounting Practices on the Implementation of Lean Manufacturing

Date: Tuesday, August 17, 2004 10:00am-12:00 p.m.
D212 Parkview Campus

Committee: Dr. Bob E. White, Chair
Dr. Azim Houshyar
Dr. Steve Butt
Dr. Samee Kumar

Abstract: This study examines the impact from the adaptation of lean manufacturing strategies on key external financial performance measures as reported by a number of management accounting methods. The research is not concerned with creating a justification for lean manufacturing strategies but rather it evaluates the inadequacies of standard financial reporting methods to accurately reflect operational improvements in the key performance measures through the early stages of a lean program.

ProModel simulation software is used in conjunction with Microsoft Excel and Visual Basic to create a simulated repetitive manufacturing environment and production planning and control system. The study examines the reported financial performance for the operation under a number of dynamic environmental conditions that would be characteristic of an operation going through a lean program. In the interest of enhancing the application of the results to real world manufacturing a stochastic environment was created through both a highly variable sales demand and a manufacturing process with variation built into each operation.

The results of the study indicate that both gross and net profit, as reported by widely accepted management accounting methods, suffer significant reductions in the early stages of a lean program. The reduction in these key measures continues until either (1) the savings from the reduction in inventory, with associated indirect labor and carrying costs, reach a level sufficient to offset the impact from the liberation of attached costs of inventory tracked on the balance sheet or, (2) the reduction in on-hand inventory ceases. This implies that the erroneous negative impact could continue to be reflected in the financial reports for a considerable period. Five management accounting methods are modeled: full absorption costing, direct costing, activity based costing, throughput costing and, the Meade-Kinsinger method of costing. All methods are shown to exhibit similar results in regard to gross and net profit to varying degrees.

Related Topics

Main List of Archives:
Dissertation Defenses

Current Dissertation Defenses