a. Principles of a Lean Information System:

• Elimination of waste: The primary goal of a lean information system is to eliminate non-value-added activities such as excess data collection and complex reports.
• Continuous improvement: The system should facilitate ongoing improvement by providing timely and relevant data that help management make informed decisions.
• Simplicity and flow: A lean information system should prioritize simplicity, ensuring that information flows smoothly from data collection to reporting.
• Real-time data: Real-time access to information allows for more responsive decision-making.
• Customer focus: The system should be designed to meet the needs of the end users (managers), providing them with the information they need when they need it.
• Focus on value: Lean information systems focus on data that directly support value-adding activities, reducing clutter in reporting.

b. Reasons Why KK’s Current System Fails to Meet Lean Information Requirements:

• Errors in data capture: KK’s current system has issues with the accuracy of data input, which causes incorrect variance reports. Lean systems emphasize error-free data capture to provide reliable information.
• Delayed reporting: Variance reports are produced two weeks after the month-end, which is too slow to support real-time decision-making. A lean system would require more immediate data.
• Focus on traditional variances: The current system emphasizes standard costing and traditional variances, which may not align with the objectives of a lean manufacturing environment focused on reducing waste and cycle times.
• Complexity and waste: The absorption costing method and complex reporting likely generate unnecessary data, contradicting the lean principle of eliminating waste.

c. Changes to Implement Lean Accounting:

• Switch to value stream costing: Rather than using absorption costing, KK should adopt value stream costing, which aligns costs with the value-adding processes in the business.
• Real-time data integration: Implement systems that allow for real-time tracking of production cycle times, material usage, and inventory levels to support lean decision-making.
• Simplified reporting: Reports should focus on key performance indicators (KPIs) related to lean metrics such as cycle time reduction, waste elimination, and just-in-time production, rather than traditional variance reports.
• Employee involvement: Encourage employees to contribute to continuous improvement by using the accounting system to track and report their suggestions for reducing waste and improving processes.