Scenario

This assignment will require research. You are advised to read the articles shared on Research teaching nexus before answering the questions.

The Goal, originally published back in 1984, presents the theory of constraints and throughput accounting within the context of a novel. It tells the story of Alex Rogo, a plant manager at a fictional manufacturing company called UniCo, which is facing imminent closure unless Alex can turn the loss-making plant into a profitable one within three months. In his attempt to do so, Alex is forced to question the whole belief in the US at the time that success in manufacturing is represented by a 100% efficient factory (ie everyone and every machine is busy 100% of the time), which keeps cost per unit as low as possible).

Based on the book The Goal: A Process of Ongoing Improvement Eli Goldratt and Jeff Cox.

REQUIRED

1. The book The Goal: A Process of Ongoing Improvement illustrate the process how a firm can implement throughput accounting. How these concepts can be applied to a service organization. illustrate your answer with an example of your choice.

2. How are theory of constrain and throughput accounting directly contrast to the fundamental principles of conventional cost accounting? Critically analyze with literature support.

Traditional cost accumulation systems do not tend to relate research and development costs to the products that caused them. Instead they write off these costs on an annual basis against the revenue generated by existing products. This makes the existing products seem less profitable than they really are. If research and development costs are not related to the causal product the true profitability of that product cannot be assessed. Traditional cost accumulation systems usually total all non-production costs and record them as a period expense. Both manufacturing and service industries take similar steps to ensure that returns are maximized over the product/service life cycle.

3. Discuss how a firm can Maximize the return over the product life cycle?