capacity and Throughput Accounting Flashcards
When dealing with capacity management, when do you use Margin analysis vs throughput accounting?
If you’re demand constrained - margin analysis
if you’re facility constrained - throughput analysis
what are capacity management issues
resource capability
capacity deployment
capacity measures - absorption v throughput accounting
organizational strategy: Constraints
what is resource capability
resources = potential value
actively available = actively used + Unused capacity
what is capacity deployment
throughput units of revenue generation
managed by controlling downtime, changeover, and excess inventory
how can you calculate equipment efficiency
Activation ratio
Efficiency ratio
what is the activation ratio equation
Activation Time / Total Available Time
what is the Efficiency Ratio equation
utilization time / activation time
What is Throughput (T)
The rate in which a system produces contribution margin (Sales - Marerials)
what is Investment (I) (throughput accounting)
assets, both working capital and fixed
What is Operating Expense
all expenses excluding totally variable costs
What is the net profit (NP) equation
NP - Throughput - Operating Expense
What is Return on Investment Equation
Net Profit / Investment
What is the TA Productivity
Operating leverage
Throughput / Operating Expense
What are investment turns (Asset utilization)
Throughput / Investment
What is Produce Profit Velocity
Throughput / Hours on constraint
