A low-cost profit strategy includes measurements that will also be attributable to any organization attempting to achieve operational excellence. Companies pursuing lean Six Sigma programs fall into this definition. A separate section is provided to explain the measurements typically indicative of attributes specific to lean Six Sigma initiatives.

The profit-focused accounting terms and definitions are used in addition to common traditional accounting terminology. This will provide information for companies that do not want to utilize a throughput accounting approach. The correlation of terms and their meaning will also aid companies that do want to consider a transition to throughput accounting. This will hopefully help to avoid confusion and make this book a more effective reference tool.

Sales/Revenue This measurement should reflect the net value of orders or services provided to customers. It is used as a base for determining percentage relationships of costs and margins and net income to sales. Net sales per employee are considered a traditional benchmark of profitability. A good analytical comparison is to calculate the difference between the average net sales per total employees and production employees to show the accumulated cost of support within a manufacturing facility. When benchmarking with other companies, consideration should be given to make sure that you are comparing similar types of manufacturing companies since job-shop metrics will not be the same as a repetitive manufacturer.

Material Cost This measurement, also called direct material, is the same whether using throughput accounting or traditional...