by Dr Lisa | POOGI Series, Theory of Constraints Finance, Accounting, and Cash Flow, Theory of Constraints in Operations
Up to this point, we have discussed how Drum-Buffer-Rope scheduling has the potential to double your capacity with little or no investment or expense. And Throughput Accounting has provided you visibility on the rate at which you make money. Both of these...
by Dr Lisa | POOGI Series, Theory of Constraints Finance, Accounting, and Cash Flow
You can also perform a sensitivity analysis to determine the breakeven level of T/CU. In this example, it would be the Operating Expense level of $615,000 divided by 2,912 which is $211.20. Pricing with Throughput Accounting is much easier and potentially much more...
by Dr Lisa | POOGI Series, Theory of Constraints Finance, Accounting, and Cash Flow
Dr. Goldratt says it this way: “If a process of ongoing improvement is what we are after, which of the three avenues of Throughput, Inventory, or Operating Expense is more promising? If we just think for a minute the answer becomes crystal clear. Both Inventory and...
by Dr Lisa | POOGI Series, Theory of Constraints Finance, Accounting, and Cash Flow
We have discussed some of the problems with Cost Accounting, yet only touched on the alternative, “Throughput Accounting”. We promised to explore Throughput Accounting in more depth, and explain how implementing its concepts will help you understand the rate at which...
by Dr Lisa | POOGI Series, Theory of Constraints Finance, Accounting, and Cash Flow
Throughput is the rate at which the system generates money. It is similar to Gross Margin or Contribution Margin, but it is also different in that TOC (Theory of Constraints) does not consider direct labor as a variable cost, but rather as Operating Expense. The role...
