Accounting Q&A · Cost and Management Accounting · Topic 25
Work through the questions, then reveal the answers to check your reasoning.
25 short-answer questions. Try each question before revealing its answer.
Worked example
Product A gives throughput of 48 and uses six bottleneck minutes. Product B gives 35 and uses five minutes. A earns 8 per bottleneck minute versus 7 for B, so prioritise A up to demand under these assumptions.
Core concepts
1. What is a constraint?
A factor limiting the system’s ability to achieve its goal.
2. What is a bottleneck?
A resource whose available capacity limits the system’s output under the current conditions.
3. What is throughput in a common manufacturing textbook model?
Sales revenue less totally variable costs, often treated as direct material cost in short-run exercises.
4. What is operating expense in TOC?
Money spent turning investment or inventory into throughput under the model.
5. Why focus on sales rather than production alone?
Unsold output ties up resources and does not generate throughput.
6. What are the five focusing steps?
Identify the constraint, exploit it, subordinate other activity, elevate it, then repeat when it moves.
7. What does exploit the constraint mean?
Make better use of existing constraint capacity before adding capacity.
8. What does subordinate other activities mean?
Align upstream and downstream work with what the constraint can handle.
9. What does elevate the constraint mean?
Increase constraint capacity or reduce demand on it where justified.
10. Why repeat the cycle?
Removing one constraint can shift the limit to another resource or to demand.
Worked applications
11. A product sells for 90 and totally variable cost is 30. What is throughput per unit?
60.
12. If it uses 12 bottleneck minutes, what is throughput per minute?
5.
13. Product B earns throughput of 48 and uses eight minutes. Which ranks higher?
B at 6 per minute, compared with A at 5.
14. The bottleneck has 240 minutes and B demand is 20 units. How many minutes remain after satisfying B?
80 minutes, assuming eight minutes each and no changeovers.
15. How many whole A units fit into the remaining 80 minutes?
Six units at 12 minutes each, with eight minutes left.
16. What is a throughput accounting ratio in a common exam model?
Throughput per bottleneck hour divided by operating cost per bottleneck hour as defined in the question.
17. What is the ratio when those amounts are 120 and 100?
1.20.
18. Why protect the bottleneck from defective inputs?
Defects consume scarce time without producing saleable output.
19. What is a buffer in this context?
A protective amount of time or work that helps prevent disruption at a constraint or delivery point.
Review and exam practice
20. What is drum-buffer-rope?
The constraint sets the pace, buffers protect flow, and release is coordinated with that pace.
21. Why can maximising non-bottleneck utilisation hurt performance?
It can build work in process without increasing system throughput.
22. What if two resources are simultaneously binding?
A single throughput-per-minute ranking may fail. Use a model that accounts for both constraints.
23. What should you check before buying additional bottleneck capacity?
Assess incremental throughput, capacity cost, demand and where the next constraint will appear.
24. How can demand itself become the constraint?
Available capacity exceeds profitable demand for output.
25. What should a TOC recommendation quantify?
State the constraint, throughput per scarce unit, demand limits and expected impact on total throughput.