As a new senior accountant of Ferndale Rugs, Inc., an exotic rug manufacturer, you have taken on the new responsibility of variance analysis for the company. During your monthly analysis, the companys current performance report reveals a relatively large and unusual sales volume. This is considering the past three quarters of operating in a deficit, the sales volume is favorable but the sales price variance is unfavorable. Now the CEO has asked for a recommendation on how the organization can become a lean organization and whether the theory of constraints can be implemented.

• What recommendations would you give the CEO on how to become a lean organization and how the theory of constraints could be implemented?