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Lean Finance

Why Move Away from Absorption Costing?

One of the main ways finan­cial lead­ers can sup­port a lean trans­for­ma­tion is to make the shift from absorp­tion cost­ing to a method that more accu­rate­ly reflects the costs of a lean oper­a­tion. Learn the three main ben­e­fits and three main down­sides of mov­ing to direct cost­ing, vari­able cost­ing, val­ue stream cost­ing, or anoth­er method.

Course Videos

1

Getting Started with Lean Finance

09:16

 2

How Continuous Improvement Helps the P&L

03:41Members only

 3

How Continuous Improvement Reduces COGS

03:15Members only

 4

How Continuous Improvement Reduces Inventory Carrying Costs

02:59Members only

 5

How to Calculate Soft Savings

08:06Members only

 6

How Lean Can Make a Company's P&L Look Worse

03:26Members only

 7

Why Don't We See Financial Results from Our Improvements?

05:32Members only

 8

What Is Absorption Costing?

02:15Members only

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Why Move Away from Absorption Costing?

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Next VideoHow to Start Moving Away from Absorption Costing

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 11

Direct Costing vs. Value Stream Costing

02:37Members only

 12

Make-to-stock, Make-to-order, And Deferred Revenue Recognition

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 13

Lean Budgeting and Forecasting

06:04Members only

 14

How to Improve the System as a Whole

03:02Members only

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Next Video How to Start Moving Away from Absorption Costing 

Tran­si­tion­ing from absorp­tion cost­ing to direct cost­ing is a fun­da­men­tal dif­fer­ence in how we clas­si­fy and cal­cu­late costs, and requires mak­ing both men­tal and tech­ni­cal shifts. Learn the ten steps to start mov­ing away from absorp­tion costing.