Solved: Wilson Manufacturing Inc has implemented lean

manufacturing i
Wilson Manufacturing Inc has implemented lean manufacturing i

Wilson Manufacturing, Inc., has implemented lean manufacturing in its Bloomington 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 1
Demand = 900 units @ $40 selling price
Beginning inventory = 100 units @ $20 ($5 materials and $15 conversion)
Production = 900 units using $4,500 of material and $13,500 of conversion cost

Week 2
Demand = 1,000 units @ $40 selling price
Beginning inventory = 100 units @ $20 ($5 materials and $15 conversion)
Production = 900 units using $4,500 of material and $13,500 of conversion cost

Week 3
Demand = 900 units @ $39 selling price
Beginning inventory = 0
Production = 1,000 units using $5,000 of material and $15,000 of conversion cost.

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.

Wilson Manufacturing Inc has implemented lean manufacturing i

ANSWER
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