 Throughput accounting and stochastic system behaviour: importance of low throughput productsOlli-Pekka Hilmola and Lauri Lattila International Journal of Applied Management Science, 2008, vol. 1, issue 2, 123-142 Abstract: Nearly for two decades, throughput accounting has argued against practices of management accounting. It has built mainly its alternative theory on simple and static example of choosing right product mix to maximize profitability of a manufacturing unit. In this research work, we simulate original throughput accounting product mix problem and use stochastic variation in the production process phases and in the end product demand. Results show that variation creates situation, where system profits increase significantly; this is mostly caused by the reason that we have enough WIP in the process, constraint resource is having occasionally lower cycle-times and un-favoured low throughput product is being produced due to the reason that there does not exists that high demand high yield one. Based on these findings, we propose that throughput accounting theory should be modified – variability in some situations and with low throughput products is the main factor for higher profitability. Keywords: throughput accounting; stochastic processes; system dynamics; simulation; cycle times; work-in-process; WIP; low throughput; variability; manufacturing. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ids:injams:v:1:y:2008:i:2:p:123-142 Access Statistics for this article More articles in International Journal of Applied Management Science from Inderscience Enterprises Ltd |
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