13A2:
0132357余文康
0132365王志浩
0132383丁聿盟
contents
1 Theory of constraints
2 Throughput accounting
3 Performance measures in throughput accoungting
4 Throughput ratio
Theory of constraints(TOC):It's an approach production management
which aims to maximise sales revenue less materials cost.It focues on
bottlenecks which act as constraints to the maximisation of through.
Throughput :It's the money generated from sales minus the cost of the
materials used in making the items sold
Bottleneck resource or binding constraints:It's an activity which has a
lower capacity than preceding or subsequent activities,thereby limiting
throughput.
Throughput=Sales-Material costs
five steps approach(Goldratt)
Step 1 Ifentify the constraint.
Step 2 Decide how to exploit the constaint in order
to maxmise througuput.
Step 3 Subordinate and synchronise everything
else to the decisions made in Step 2.
Step 4 Elevate the performance of the constraint.
Step 5 If the constraint has shifted during any of
the above steps,go back to Step 1.Don't allow
inertia to cause a new constraint.
Difference between Convention cost
accounting and Throughput accounting
Inventory
Costs classification
Direct labour
Product profitability
Profit
Performance measures in throughput
accounting 产量会计的业绩计量
In a throughput accounting environment,production
priority（生产优先权）is given to the products best able
to generate throughput.Performance measures in
throughput accounting are based around the concept that
the aim is to maximise throughput.This is achieved by
maximising the throughput per unit of bottlneck
resource.
when an organisation makes more than one product, total
throughput is maximised by giving priority to those
products that earn the largest throughput per unit of
bottleneck resource.Products should be ranked in order
of priority according to their throughput per unit of
bottleneck resource.
Throughput is maximised by ranking products in order
for production and sales according to the throughput
that they earn per unit of bottleneck resources they
consume.
Throughput returns per factory hour：
sales - direct material costs
usage of bottleneck resource in hours(factory hours)
Step 1
Determine the bottleneck resource
The bottleneck resource is machine time (4,000 machine hours available
each week).
Step 2 Calculate the throughput per unit for each product
Product A
$
Sales price
2.80
Materials cost
1.20
Throughput/unit 1.60
Product B
$
1.60
0.60
1.00
Product C
$
2.40
1.20
1.20
Step 3 Calculate throughput per unit of limiting factor (machine hours)
Machine hours per
unit
Throughput per
machine hour
Product A
0.5 hours
$3.20*
* $1.60 / 0.5 hours = $3.20
Product B
0.2 hours
$5.00
Product C
0.3 hours
$4.00
Step 4
C
Rank products
Product A
3rd
Product B
1st
Product
2nd
Step 5 Allocate resources to arrive at optimum production plan
The profit-maximising weekly output and sales volumes are as
follows.
Product Units Bottleneck resource Total hours Throughput per
Total
hours/unithour
hour
throughput
$
$
B
C
4,000
6,000
4,000
0.2 hours
5,000
0.3 hours
1,500
2,300
4.00
0.5 hours
1,700
4,000
3.20
A (balance) 3,400
5,440
15,440
operating
(10,880)
week
4,560
800
5.00
Less:
expenses
Profit per
4 Throughput accounting ratio
Throughput per unit of bottleneck resource
TPAR =
Factory cost per unit of bottleneck resource
note：'per unit of bottleneck resource' = 'per
factory hour'
Factoty cost per
unit of bottlneck =
resource
Total factory costs
Total units of bottleneck resource
note：'Total factory costs' = 'Total operating costs'
Example:P59 Question
Interpretion of TA ratio
TA ratio ＞1，make profit
TA ratio ＜1，resulting a loss
In a throughput environment,production
priority must be given to the products best able
to generate throughput,that is those products
that maximize throughput per unit of
bottleneck resource.
The TA ratio can be used to assess to relative
earning capabilities of different products and
hence can help with decision making
How can a business improve a throughput
accounting ratio?
Measures
Consequences
Increse sales price per unit
Demand for the product
may fall
Reduce material cost per unit,
e.g. change materials and/or
suppliers
Quality may fall and bulk
discounts may be lost
Reduce operating expenses
Quality may fall and/or
errors increase
Throughput and limiting factor analysis
The throughput approach is very similar to the
approach of maximising contribution per unit
of scarce resource.
Throughput is defined as sales less material costs
whereas contribution is defied as sales less all
variable costs.
Throughput assumes that all costs except
materials are fixed in the short run.