Iscussion 1: Throughput Accounting and Optimization

Discussion 1: Throughput Accounting and Optimization

Kendra Reynolds has just become a manager at a manufacturing company. The performance in her unit has declined recently, and she needs to fix it. When she arrives, she finds unused capacity and that excess inventory is backing up. She begins trying to understand the problem, but the answer is not obvious. A colleague mentions that throughput accounting may help her analyze the situation and develop an effective solution.

Managers often find themselves facing problems where the solution is not obvious. A tool designed for analyzing these complex questions is throughput accounting (TA), as Corbett describes in the article a?Three-Questions Accounting.a? TA requires you to determine how a decision will impact throughput, operating expense, and investment. The relationship among these factors can help you determine if a decision will improve profitability.

Think of how TA could affect your organization or one with which you are familiar. Think of a decision at the organization you chose and the effect the decision has had on the organizationas throughput and operating expenses. Also consider the decisionas effect on the amount of money invested in operations, such as people, processes, software, infrastructure, and current projects.

If you are not familiar with an organization in this situation or if you are restricted by confidentiality requirements, select a different organization.

You can research organizations in the business press.
Post by Day 3 the following:

A brief description of the organization you selected and the decision this organization made

A description of the impact that the decision had on investments in operations, such as people, processes, software, infrastructure, and current projects

Your determination of whether the organization made the correct decision, based on your application of the principles of throughput accounting (Justify your response.)


Jacob, D., Bergland, S., & Cox, J. (2010). Velocity: Combining Lean, Six Sigma, and the theory of constraints to achieve breakthrough performance. New York, NY: Free Press.

Read pages 195a end (This will be referred to as Part 3 of your Velocity readings.)

In Part 3, the characters determine specific problems their company faces. They use the strategies of Lean, Six Sigma, and the theory of constraints to address their problems and to demonstrate a mastery of the ideas discussed throughout the book.

Corbett, T. (2006). Three-questions accounting. Strategic Finance, 87(10), 48a 55.
Retrieved from the Walden Library databases.

The author explains how the theory of constraints can be integrated into management accounting using an approach called throughput accounting. The author addresses criticisms of throughput accounting, arguing that many of these criticisms stem from misunderstandings and misinterpretations of the approach.

Pisano, G. P., Rennella, M., & Huckman, R. (2010). Wyeth Pharmaceuticals: Spurring scientific creativity with metrics [Case study]. HBS Case 9-607-008. Boston, MA: Harvard Business School. Retrieved from 0aa912314ac1cc9ad193017f21ba9df4