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The behaviors required to achieve good performance measures with directly conflicts with lean principles (e.g. The average material cost is relatively simple to calculate and probably doesn’t need to be updated too often unless the material is a commodity.

Labor and overhead rates can be set to zero, as they are no longer need to calculate individual product costs.

But the real operating behavior is “anti-lean”: build inventory, long production runs, fewer change-overs, produce in anticipation of future demand and large batch sizes.

Any behavior that results in good product being produced improves these variances.

Lean Accounting uses the average cost method to value inventory and cost of goods sold.

Material can be valued at average cost per unit, either for each specific item (if a company has many SKU’s) or a simple average of all materials (if a company has few raw materials).

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Decisions on the profitability of products, customers, business units and orders is usually based on comparing the projected margin to the standard margin. A management accounting system is the internal information used by management to measure, manage, control operations and also to make business decisions.Inventory valuation, on the other hand, is part of A primary weakness of a standard costing system is that all of the information created & used is based on some combination of product cost information and production reporting information.Sourcing decisions are usually based on the comparison of the standard cost to the purchase price.There is motivation to try to reduce a product cost to improve profitability.

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