WSU ACCTG 231 - Theory of Constraints (4 pages)

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Theory of Constraints

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Theory of Constraints


Second half of Prologue

Lecture number:
Lecture Note
Washington State University
Acctg 231 - Introduction to Managerial Accounting

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ACCTG 231 Lecture 2 Managerial Accounting An Overview Outline of Current Lecture I Theory of Constraints II Measurement Skills III Leadership Skills IV Code of Conduct for Management Accountants V IMA Guidelines for Ethical Behavior VI IMA Guidelines for Resolution of an Ethical Conflict VII Why Have Ethical Standards VIII Corporate Social Responsibility Current Lecture I II Theory of Constraints A constraint also called a bottleneck is anything that prevents you from getting more of what you want The Theory of Constraints TOC is based on the observation that effectively managing the constraint is the key to success o The constraint in a system is determined by the step that has the smallest capacity o The goal is to manage the constraint with the intent of generating more business rather than cutting the workforce Identify the weakest link Allow the weakest link to set the tempo only actions that strengthen the weakest link in the chain improve the process Focus on improving Recognize that the weakest link is stronger start the process all over again Measurement Skills A good manager complements an understanding of strategy risks and business processes with data driven analysis The key to effective analysis is to understand that the question you are addressing defines what you measure and how you analyze the data What net income should my company report to its stockholders o Measure and report historical data that complies with applicable rules How will my company serve its customers o Measure and analyze mostly nonfinancial process oriented data These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute III IV V Will my company need to borrow money o Measure and analyze estimated future cash flows The primary purpose of this course is to teach measurement skills that managers use to support planning controlling and decision making activities o Planning Controlling

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