ABSTRACT
Inventory valuation is a necessary activity accounting must perform to maintain compliance with financial reporting standards. Standard costing is a method employed to value inventory, but as explained in the two previous chapters, it is a complex system with a great deal of detail, and it consumes a great deal of the time of many employees. Lean inventory valuation methods use the cost flow assumption of average cost. As a Lean chief financial officer, it is important to lead this effort because inventory valuation is a financial accounting requirement under Generally Accepted Accounting Principles. The prices paid for purchased items may change. And finally, actual production costs change over time. The value stream income statement shows $867,550 of actual production costs for 20 working days in the month, which means the average production costs per day are $43,828. The primary benefit of lean inventory valuation is the elimination of unnecessary work, which creates capacity to re-allocate to other tasks.
