Fox Security Devices (FSD) has introduced a just-in-time production process and is considering adopting lean accounting principles to support its new production philosophy. The company has two product lines: Mechanical Devices and Electronic Devices. Two individual products are made in each line. Product-line manufacturing overhead costs are traced directly to product lines and then allocated to the two individual products in each line. Thecompany's traditional cost accounting system allocates all plant-level facility costs and some corporate overhead costs to individual products. The latest accounting report using traditional cost accounting methods included the following information (in thousands of dollars):

	Mechanical Devices		Electronic Devices
	Product A	Product B	Product C	Product D
Sales	$790	$530	$980	$420
Direct materials (based on quantity used)	200	105	265	65
Direct manufacturing labor	175	70	225	75
Manufacturing overhead (equipment lease, supervision, production control)	120	120	210	135
Allocated plant-level facility costs	55	35	65	35
Design and marketing costs	92	47	100	43
Allocated corporate overhead costs	13	23	45	7
Operating income	$135	$130	$70	$60

SD has determined that each of the two product lines represents a distinct value stream. It has also determined that out of the $190,000 ($55,000+$35,000+$65,000+$35,000) plant-level facility costs, product A occupies 25% of the plant's square footage, product B occupies 15%, product C occupies 35%, and product D occupies 15%. The remaining 10% of square footage is not being used. Finally, FSD has decided that in order to identify inefficiencies, direct material should be expensed in the period it is purchased, rather than when the material is used. According to purchasing records, direct material purchase costs during the period were asfollows:

	Mechanical Devices		Electronic Devices
	Product A	Product B	Product C	Product D
Direct material (purchases)	$200	$110	$275	$85

1.	What are the cost objects in FSD's lean accounting system?
2.	Compute operating income for the cost objects identified in requirement 1 using lean accounting principles. What would you compare this operating income against? Comment on your results.