Throughput Accounting E-Book

Steven M. Bragg

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 253

Veröffentlichungsjahr: 2007

Beschreibung

Praise for Throughput Accounting: A Guide to Constraint Management "Throughput Accounting provides managers with a fresh set of eyes to identify and control bottlenecks. The drum, buffer, and rope will become part of the cost accounting lexicon in the future." --Geoffrey Garland, Controller, StacoSwitch, Inc. "This is good stuff! Steven Bragg has introduced us to an accounting structure that will enhance our bottom line utilizing throughput accounting methodology. Finally! We have a presentable means to transform a company's financial functions to support the cultural change to throughput accounting." --Rick J. Stevens, President, LeanThinkingbyAccountants, LLC "A thought-provoking, insightful, and useful book that explains how older conventions of accounting can lead to poor management decisions. Instead of focusing on typical cost-cutting methods only, Mr. Bragg provides CFOs with a systemic approach on how to instead focus on maximizing profits and become better business partners." --Arif Iqball, Executive Director and CFO, Avon Products Co. Ltd. Japan "Throughput Accounting by Steve Bragg presents a new way to evaluate and apply the concepts of cost accounting with greater impact on operational efficiencies. An interesting, understandable, and useful guide for anyone who needs a valuable source of information and ideas relating to financial and accounting affairs." --Carlos Millan, Director of Finance and Operations, NOLA, Grupo Quanam Throughput Accounting addresses every possible area of constraint management that would be of interest to an accountant. This groundbreaking book includes chapters covering financial analysis scenarios with case studies that show specifically how throughput accounting can be used to find the best solutions in a large number of real-world situations. If you are an accounting manager, financial analyst, production planner, or production manager, Throughput Accounting contains the tools you need to improve your company's performance.

Leseprobe

CONTENTS

About the Author

Preface

Chapter 1: Overview of the Theory of Constraints

Definitions for the Operational Aspects of the Theory of Constraints

The Operational Aspects of the Theory of Constraints

Nature of the Constraint

Definitions for the Financial Aspects of the Theory of Constraints

The Financial Aspects of the Theory of Constraints

The Opportunity Cost of Operations

Summary

Chapter 2: Constraint Management in the Factory

Locating the Constraint

Management of the Constrained Resource

Types of Policy Constraints

The Constraint Buffer

The Assembly Area Buffer

Production Scheduling

Batch Sizes

Machine Setups—Sales Perspective

Machine Setups—Reduction Efforts

Summary

Chapter 3: Throughput and Traditional Cost Accounting Concepts

The Emphasis on Cost versus Throughput

The Emphasis on Product Cost versus System Profitability

Variations in the Treatment of Low-Margin Products

The Emphasis on Burdened versus Throughput Pricing

Variations in Scrap Reporting

Variations in Variance Analysis

The Treatment of Direct Labor

Inventory Valuation

Activity-Based Costing versus Throughput Accounting

Direct Costing versus Throughput Accounting

Summary

Chapter 4: Throughput and Financial Analysis Scenarios

The Basic Throughput Analysis Model

The Low Price, High Volume Decision

The Low Price for Export Market Decision

The Outsourced Production Decision

The Increased Downstream Capacity Decision

The Increased Upstream Product Processing Decision

The Increased Sprint Capacity Decision

The Additional Quality Workstation Decision

The Increased Constraint Staffing Decision

The New Product Addition Decision

The Product Cancellation Decision

The Altered Product Priority Decision

The Raw Material Constraint Decision

The Constraint in the Marketplace Decision

The Plant Closing Decision

Underlying Concepts of the Throughput Analysis Model

Summary

Chapter 5: Throughput in the Budgeting and Capital Budgeting Process

Capital Budgeting with Throughput Accounting

Budgeting for Revenue with Throughput Accounting

Budgeting for New Products with Throughput Accounting

Budgeting for Operating Expenses with Throughput Accounting

Budgeting for Production Labor Expenses with Throughput Accounting

Budgeting for Sales Department Expenses with Throughput Accounting

Summary

Chapter 6: Throughput and Generally Accepted Accounting Principles

The Nature of Generally Accepted Accounting Principles

Differences Between Throughput and GAAP Accounting

Income Statements for Throughput Accounting and GAAP

Modifying the Chart of Accounts for Throughput Accounting

Reconciling Throughput Accounting to GAAP

Throughput Accounting and Cost-Plus Contracting

Summary

Chapter 7: Throughput and Control Systems

Constrained Resource Controls

Buffer Controls

Production Scheduling Controls

Summary

Chapter 8: Throughput and Performance Measurement and Reporting Systems

Ratio of Throughput to Constraint Time Consumption

Total Throughput Dollars Quoted in the Period

Ratio of Throughput Dollars Quoted to Throughput Firm Orders Received

Sales Productivity

Ratio of Throughput Booked to Shipped

Trend Line of Sales Backlog Dollars

Ratio of Maintenance Downtime to Operating Time on Constrained Resource

Throughput of Post-Constraint Scrap

Constraint Utilization

Constraint Schedule Attainment

Manufacturing Productivity

Manufacturing Effectiveness

Order Cycle Time

Throughput Shipping Delay

Inventory Turnover

Return on Investment

Throughput Contribution Report

Buffer Management Report

Buffer Hole Percentage Trend Report

Misleading Measurements and Reports

Summary

Chapter 9: Throughput and Accounting Management

Throughput Analysis Priorities

The Subordination Concept

The Duration of Capacity Constraints

The Inventory Build Concept

The Capacity—Buffer Interrelationship

Investment Analysis

Price Formulation

Transfer Pricing

Cost Reporting

Staffing Decisions

The Problem with Using Throughput Accounting for Tactical Changes

Throughput Software and Makeshift Systems

Summary

Chapter 10: Throughput Case Studies

Summary

Index

Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Bragg, Steven M.

Throughput accounting : a guide to constraint management / Steven M. Bragg.

p. cm.

ISBN-13: 978-0-471-25109-5 (cloth)

1. Theory of constraints (Management) 2. Productivity accounting. I. Title.

HD69.T46B73 2007

658.5′036-dc22

2006032738

To the production crew at John Wiley, who might know a thing or two about bottlenecks—usually the authors!

ABOUT THE AUTHOR

Steven Bragg, CPA, CMA, CIA, CPIM, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young and auditor at Deloitte & Touche. He received a master’s degree in finance from Bentley College, an MBA from Babson College, and a bachelor’s degree in Economics from the University of Maine. He has been the two-time president of the Colorado Mountain Club, and is an avid alpine skier, mountain biker, and certified master diver. Mr. Bragg resides in Centennial, Colorado. He has written the following books, published by John Wiley & Sons:

Accounting and Finance for Your Small Business

Accounting Best Practices

Accounting Control Best Practices

Accounting Reference Desktop

Billing and Collections Best Practices

Business Ratios and Formulas

The Controller’s Function

Controller’s Guide to Costing

Controller’s Guide to Planning and Controlling Operations

Controller’s Guide: Roles and Responsibilities for the New

Controller

Controllership

Cost Accounting

Design and Maintenance of Accounting Manuals

Essentials of Payroll

Fast Close

Financial Analysis

GAAP Guide

GAAP Implementation Guide

Inventory Accounting

Inventory Best Practices

Just-in-Time Accounting

Managing Explosive Corporate Growth

The New CFO Financial Leadership Manual

Outsourcing

Payroll Accounting

Payroll Best Practices

Revenue Recognition

Sales and Operations for Your Small Business

The Ultimate Accountants’ Reference

Other books authored by Mr. Bragg include:

Advanced Accounting Systems (Institute of Internal Auditors)

Run the Rockies (CMC Press)

FREE ON-LINE RESOURCES BY STEVE BRAGG

Steve Bragg issues a free bi-monthly accounting best practices newsletter and an accounting best practices podcast. You can sign up for both at www.stevebragg.com.

PREFACE

The practice of throughput accounting is about how to wring more profits from your company by focusing strictly on the management of your bottleneck resource, or constraint. This approach is entirely at odds with the traditional use of detailed allocations to arrive at fully burdened costs for your products, customers, and sales regions—which can yield results so convoluted that a company can become paralyzed with indecision. Not so with throughput accounting, which yields crisp and easy to understand results for a broad range of management applications.

Throughput Accounting begins with an introduction to the concepts of constraint management, followed by supplemental information about how it is used in the factory for daily production decisions. The book then addresses how constraint management can be applied within the accounting department, beginning with a comparison between it and other cost accounting systems. Of particular interest are two chapters on financial analysis scenarios and case studies that show specifically how throughput accounting can be used to find the best solutions in a large number of real-world situations.

Throughput Accounting also explores how the traditional budgeting and capital budgeting models can be adapted to integrate throughput concepts, as well as how control systems can be designed to warn of problems related to the constraint and several supporting functions. In addition, the book shows which reports and metrics to use in a throughput environment, as well as how this information can be extracted from an accounting system designed to accumulate information for reports that conform to generally accepted accounting principles.

If you are an accounting manager, financial analyst, production planner, or production manager, then Throughput Accounting contains the tools you need to improve your companys performance.

STEVEN M. BRAGG

Centennial, Colorado

September 2006

CHAPTER 1

OVERVIEW OF THE THEORY OF CONSTRAINTS

Every now and then, a completely new idea comes along that can be described as either refreshing, disturbing, or both. Within the accounting profession, the theory of constraints is that change. It originated in the 1980s through the writings of Eliyahu Goldratt. His training as a physicist, rather than as an accountant, appears to have given him a sufficiently different mind-set to derive several startling changes to the concepts of operational enhancement and cost accounting. The theory of constraints is based on the concept that a company must determine its overriding goal, and then create a system that clearly defines the main capacity constraint that will allow it to maximize that goal. This chapter describes the operational and financial aspects of the theory of constraints.