A simulation-based comparison of TOC and traditional accounting performance measures in a process industry

• Published in: Journal of manufacturing technology management Vol. 16; no. 3; pp. 328 - 342
• Main Authors: Mehra, Satish, Inman, R. Anthony, Tuite, Gregory
• Format: Journal Article
• Language: English
• Published: Bradford Emerald Group Publishing Limited 01-04-2005
• Subjects: Accounting; Accounting procedures; Accounting systems; Cash flow; Comparative analysis; Computer simulation; Cost accounting; Decision making; Inventory; Labor costs; Management accountants; Management accounting; Manufacturers; Manufacturing; Overhead costs; Performance evaluation; Profits; Simulation; Statistical analysis; Studies; Theory of constraints; Accounting procedures; Performance measures; Process management
• ISSN: 1741-038X; 1758-7786
• DOI: 10.1108/17410380510583635

Purpose - Aims to compare performance measurement of a continuous process manufacturing operation under two accounting systems - a traditional cost accounting system and the theory of constraints (TOC) system.Design methodology approach - Using a computer-based simulation methodology to capture operational performance, it is found that the TOC-based accounting system presents a more realistic state of performance scenario.Findings - Findings from this research indicate that businesses using a TOC-based system can improve their performance more accurately, and hence gain a sustainable competitive position in the future.Research limitations implications - This research is limited to continuous process manufacturing operations.Originality value - The research makes a significant contribution to the knowledge of performance measurement.