Evaluation of throughput accounting based on theory of constraints with comparing accounting methods: A case study

A Constraint is an element that decelerates production time of a product, in particular that blocks the system from achieving its goal. Theory of Constraints can be defined as management approaches that focusing on continuous improvement by managing constraints. According to Theory of Constraints, the most important aim of Production Company is getting more profit in certain period of working time. In this sense, theory claims that every system has at least one constraint and constraints provide opportunity to organization for improvement. Dr. Eliyahu Goldratt came up with Theory of Constraints to improve the production performance of organizations in the middle of the 1980?s. Today, theory of constraints is a method which is used in management and cost accounting. Nowadays, many firms lose the change of being first class organization because of using traditional accounting systems. As firms try to survive in increasing rivalry conditions, their traditional accounting systems is following processes based on old measurement systems. For the purpose of preventing the deficiencies of old methods used for actual implementations, Throughput Accounting which is based on principles of Theory of Constraints aims to increase efficiency by getting rid of constraints. In this thesis, first of all, general elements of Theory of Constraints were explained. Afterwards, new approach named as Throughput Accounting which can be useful for management in order to improve efficiency by eliminating constraints comes out in firm?s production process and its relations with other accounting systems were examined. In the implementation part of the thesis, questionnaire related with decision of product mix was sent to the firms situated in Antalya industrial zone and a case study is implemented afterwards in chemistry firm. Thus, Throughput Accounting based on Theory of Constraints, variable costing and absorption costing which are used for determining product mixed was compared by taking their effects to profit into consideration. Consequently, how Theory of Constraints and methods of variable and absorption costing used for determining product mix and their effects to firm? profit were stated.