Throughput Accounting, Part 1: Why Cost Accounting Misleads
Six lessons built around one small plant. Every decision a manager makes from product cost gets tested in a game, and every time the cost report points the wrong way. By the end you’ll know why.
- 6 lessons, about 92 minutes in all
- Free, no sign-up. Your progress is saved in this browser
- Certificate of completion when you pass all six quizzes
- 1 What management accounting is forFinancial, cost and management accounting answer different questions. See how product cost is built, why companies use it to link daily decisions to profit, and face three questions your intuition may get wrong. 14 min
- 2 The P&Q plantMeet a small plant with two products, four workers and ₹6,000 a week of expenses. Work out its best possible week, discover it can’t make everything, and decide which product comes first. 18 min
- 3 Where the margins wentThe plant made more money with the “least profitable” product. Find out why: the constraint, throughput per constraint minute, and what happens when finance makes the cost report more accurate. 16 min
- 4 The low-margin orderDemand falls and the plant loses money every week. A new customer offers a price below product cost. Should you take it? Decide, run the week, and meet the first new paradigm. 12 min
- 5 Improve, or buy in?You have ₹5,000 for one improvement, and later a supplier offers to make P for less than it “costs” you. Test both decisions against the cost report, and learn to judge them by throughput per constraint unit. 18 min
- 6 Profits in the warehouseProduce more than you sell and cost accounting reports a bigger profit, with the same sales and less cash. See how the matching principle creates artificial inventory profits, and why that rewards the wrong behaviour. 14 min
- ✓Your certificateUnlocks when all six quizzes are passed.
This course comes from the throughput accounting session I run for management teams. Part 2, Throughput Accounting in Practice, gives you the method to replace product cost. If throughput, investment and operating expense are new to you, Fundamentals of TOC is a quick primer.