OVERVIEW

Simplified accounting and measurement for the complicated world of global business seems like a dream that could never come true. Relevance Lost (Johnson and Kaplan) and Relevance Regained (Johnson) provide a clear discussion on accounting s role in how business has suffered from the top-down management syndrome. This approach utilizes cost management data in an attempt to control and manage costs in contrast to allowing empowered employees to improve business processes. Eli Goldratt also picked up on the theme of misleading and useless cost accounting thinking and its disastrous impact on business operations and management thinking. The Theory of Constraints (TOC) answer to Relevance Lost is throughput accounting. Before launching into a detailed discussion and explanation, I will set some objectives and direction for profit-focused accounting to set the initial tone and then interject some of the suggested variations during the discussion of throughput accounting. Chapter 9 deals with the application of profit-focused accounting in more detail.

The profit-focused accounting approach will utilize some of the concepts offered by throughput accounting, especially its simplistic approach. All enterprise resource planning (ERP) systems employ bills of material or recipes to track raw material and routings to map operational processes and track direct labor though work centers. These data are included in the item master for each product manufactured. ERP systems also include information on setups and setup times and provide a foundation for planning and scheduling. Profit-focused accounting will track both raw material and direct labor as variable costs...