The P&Q Plant
Two products, four workers, ₹6,000 a week of expenses. Plan the week, take or refuse a low-price order, fund one improvement, decide to make or buy, and see whether the cost report or throughput accounting gives the right answer.
What you’ll learn
- Why product cost misleads. Overhead spread over products produces margins no decision can earn.
- Throughput per constraint minute decides the product mix, not margin per unit.
- Below-cost orders, make or buy, and improvement proposals all become simple sums once you ask: what happens to throughput, operating expense and investment?
- An improvement away from the constraint saves nothing, however good it looks on the cost report.
Based on the P&Q example Dr. Eliyahu Goldratt made famous, and the way Mohit uses it when teaching throughput accounting. Want the full story? Take the free Throughput Accounting course.