Investigation of production costs in a manufacturing company through the activity-based cost system and the theory of constraints integration

In the global environment, businesses want to control costs so that they can gain national and international competitive advantage. Because increasing competition has increased the need for accurate cost information of enterprises. Cost information calculated according to traditional cost systems causes production costs to be calculated incorrectly. Due to the inadequacy of traditional cost systems in today's conditions, Activity Based Costing (ABC) System and Theory of Constraints (TOC) approach, which is a contemporary cost/management accounting tool, gains importance. ABC provides accurate product costing as well as a detailed analysis of the relationships between resources, activities and products. However, ABC does not provide information on the constraints of these resources and activities in the production process. On the other hand TOC, focuses on how much resources in the enterprise can be utilized while carrying out production activities and the importance of the capacity of these resources, so that efficiency in production can be achieved. Sheu et al. (2003) stated that it can be achieved by using ABC and TOC together to make healthier decisions on product costs. In this direction, it is aimed to investigate the effects of the use of ABC and TOC approach together on production costs and profitability in a production company with this study. For this purpose, the "Case Study" method was preferred in order to obtain in-depth analysis and concrete data in a production company, and ABC and TOC approaches were applied together. Keywords: Activity based costing, theory of constraints, production costs, company profitability