User talk:PrashPedia

PrashPedia: Thank you for your comment on the Wikipedia Lean Accounting article. I apologize for the late reply. I do not check the article very often. I understand your question and complaint that the article does not discuss methods of cost allocation. there are two reasons for this. The first is that I wanted to keep the article rather short and accessible to a general audience. The second is that in Lean Accounting we do NOT allocate costs to products. In fact we are wary of allocating costs at all. The reason we avoid allocating costs is that we want the information used by managers, sales people, operations people, and others to be straight-forward and understandable. Whenever you allocate costs the financial information becomes unintelligible to the people who need to use it. Allocation leads to a lot of meetings to discuss the appropriateness of the allocations. This is wasted time and keeps us away from doing useful and value-adding activities.

So Lean Accounting is designed to require no allocations. We do not calculate product costs if we can avoid it. We set up value streams so that the costs can be assigned directly without allocations. Our primary reporting is direct, actual costs of the value stream without the need for allocations.

Having said that, the real world impinges when a company does not have "perfect" value streams. This is of course almost all companies - even Toyota. Inevitably we are forced to use some simple allocation when - for example - there is a monument (a shared machine in a product plant)or other issue of shared resources. But we keep this few and clear-cut.

I hope this helps. If you want more information, take a look at the blog group www.leanaccounting.ning.com. Or email me at bmaskell@maskell.com.

Brian