Page 8 - CIMA MCS Workbook November 2018 - Day 2 Tasks

CIMA NOVEMBER 2018 – MANAGEMENT CASE STUDY

TASK 2 ‐ THEORY OF CONSTRAINTS AND THROUGHPUT
ACCOUNTING

Trigger and Task

The Finance Director has emailed you:

To: Finance Manager

Date: Today

Subject: Theory of constraints and throughput accounting

Hi,

One of our competitors, TigerFizz, was recently in trouble after one of their carbonisation
machines broke down and they weren’t able to fulfil all of their customer orders for over a month.

Matt Jones is confident that our production equipment is well maintained and is in no danger of
breaking down, but I’m well aware that some of our equipment is older than is usual for this
industry and I’m concerned that if something does break that we’ll end up in the same position as
TigerFizz.

We can’t afford to disappoint our customers and potentially lose future orders as a result.
However, we don’t currently have the capital budget in the current year to upgrade our current
production lines to newer, more reliable ones.

So instead I’d like us to have a contingency plan in place for how we will deal with a potential
machine breakdown. I understand that something called the theory of constraints applies here,
along with throughput accounting, but it’s not something that I’ve encountered before.

Could you produce a report for me that covers the following:

‐ The concept of the theory of constraints and how it would apply to Grapple.

‐ What procedures we should follow in the event of a machine breakdown, both for the
resolution of the breakdown and how we organise production in the meantime.

Regards,

David Guy

Prepare the work that David has requested. (Time 45 minutes)

28 KAPLAN PUBLISHING