Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed



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Points to stress
The objective is to keep the bottleneck working at capacity. Management should consider (1) giving the bottleneck full-time attendants and (2) running the bottleneck 24 hours a day. TOC suggests that the only place in the plant that should have stock is immediately before the bottleneck, to ensure that the bottleneck stays busy. The opportunity cost of lost throughput contribution arising from quality problems at the bottleneck is an element of internal failure cost. This type of opportunity cost arises only around the bottleneck or constrained resource. Successful quality programmes maintain that it is less expensive to do it right the first time than to fix it later. They focus on preventing poor quality by attacking quality drivers such as training and product design (designing the product to use fewer and more standardised parts, designing intolerance for variations in the manufacturing process, etc. This contrasts with traditional use of ex post quality control that relies on inspection, rework and customer service of defective products.


Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012

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