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Topic 3. Throughput Accounting

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15 views1 page

Topic 3. Throughput Accounting

G

Uploaded by

chinhgpt189
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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TOPIC 3.

THROUGHPUT ACCOUNTING

1/ in short run, except for


material costs, all other costs are
fixed costs (includes labour
costs) called Total Factory Costs

What is Throughput accounting? Throughput return per factory


an approach aims to production 2/ Ideal inventory level = 0 hour = (Sales - Direct material
management aims to maximize Underlying concepts: & WIP should be valued at costs)/ factory hours
revenue less material costs material cost only
(throughput), while also reducing
inventory & operational expenses

3/ Profitability depends on how Achieved by giving priority to


quickly sales are made => products that earn the largest
Maximize profit = Maximize Throughput per unit of
Throughput bottleneck resource

Throughput = Sales -
Material costs

Theory of constraints (TOC) How to improve TAR?

St5. Go back St1. Do St1. Identify the Factory cost per unit of bottleneck
bottleneck resource TAR = Throughput per unit of
not allow inertia to St4. Elevate constraint resource = Total Factory Costs/
bottleneck resource/ Factory cost
cause a new constraint Total units of bottleneck resource
per unit of bottleneck resource

St3. Subordinate & St2. Exploit the


synchronize everything to constraint to
decision made in St2 maximize throughput
TAR should > 1 or Can be used to
company make a loss rank products

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