Question

Maxwell Company manufactures furniture and recently adopted lean accounting. Maxwell has two value streams: chairs and tables, which had total sales of $245 and $310 million, respectively.

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

Maxwell had other manufacturing costs of $116,750,000 and SG&A costs of $25 million that were not traceable. The fixed cost of prior period inventory included in the current income statement is $5.5 million for the chair stream and $22.5 million for the tables stream.

Prepare a value-stream income statement for Maxwell.

Answer 1

Solution:

Preparing the Value Stream Income Statement for Maxwell:

Income statement ($000s)
	Office Chairs		Office Tables		Total
Sales		$245,000		$310,000	$555,000
Operating Costs:
Material	$16,500		$14,500
Labor	$123,000		$96,500
Equipment related costs	$44,500		$62,800
Occupancy costs	$11,350		$12,600
Total Operating Costs		$195,350		$186,400	$381,750
Value stream profit before inventory change		$49,650		$123,600	$173,250
Less: Cost of decrease in inventory		$5,500		$22,500	$28,000
Value stream profit		$44,150		$101,100	$145,250
Less: Nontraceable costs
Manufacturing					$116,750
Selling and administration					$25,000
Total nontraceable fixed costs					$141,750
Operating income					$3,500