Throughput accounting is management accounting technique used as means of measuring performance according to theory of constraints (TOC). It is in fact consist of an assembly of techniques which has their goal the maximization of output from a production system.
Limitations of throughput accounting
- Selling price could be uncompetitive
- Material suppliers may not be reliable
- Product quality is low
- Need to deliver on time
- Very little attention is paid to overhead costs
- Ignores market developments, product developments and the stage the product has
reached in the product life cycle.