Theory of constraints and its evaluation in the terms of management accounting: An application in an industrial firm

II ABSTRACT THEORY OF CONSTRAINTS AND ITS EVALUATION IN TERMS OF MANAGEMENT ACCOUNTING: AN APPLICATION IN AN INDUSTRIAL FIRM Elif N. ÜNAL Master Thesis, Business Department Supervisor: Prof. Dr. Nihat KÜÇÜKSAVAŞ September, 2000, 137 pages Time is one of the main factors for the firms to be able to gain competitive advantage because in an increasing competitive environment, for consumer satisfaction and to increase market share, the needs and wants of consumers must be provided immediately. So as much even if the best quality product is not present when it is demanded, its value will decrease in the view of consumer. This means; for consumers, the loyalty for firm's products will decrease and for firms, market shares will have been getting smaller consistent with profit ratios. Therefore demand must be satisfied just in time, and to achieve this, products must be produced just in time. To be able to achieve this, theory of constraints plays a key role. Because managing of constraints which reveal through the production process will decrease inventory of work in process, decrease the costs as well and the production process will become more fluent and more productive so firm's products can be completed and distributed to consumers just in time. As a result firms' profitability increases. This study aims at expose the importance of identification and elimination (management) of constraints which reveal through the production process for increasing profits of firms. In this framework, in the theoretical part, theory of constraints, with throughput accounting examined in terms of management accounting. In the application part, a manufecturing firm is choosen for descriptive and explarotary case studies, in order to show the effect of this theory to the firm's profit Key Words: Constraint, Bottleneck, Throughput, Theory of Constraints, Throughput Accounting, Managing Constraints