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Questions Related to the Theory of Constraints

Provided by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida

Audio Version with Answers | TOC MC Questions | Theory of Constraints Main Page

What do Deming's New Economics, Senge's Fifth Discipline, Baker's Scoring a Whole in One, and Goldratts What is this thing called the Theory of Constraints? have in common? (See the Castellano, Young & Roehm Summary).

1. What is the goal? (See MAAW's Chapter 8) or (See the Ruhl summary).

2. What prevents an organization from achieving the goal? (See the Ruhl summary).

3. What is a constraint? (See the Ruhl, Atwater & Gagne, Rezaee & Elmore and Huff summaries.

Question 1 in the TOC Company problem is also relevant).

4. How is a bottleneck defined in TOC? (See the summary of The Goal Chapter 18).

5. Why does Goldratt condemn placing emphasis on the efficiency of non-constraints? (See MAAW's Chapter 8).

6. How is net profit defined in TOC? (See MAAW's Chapter 8 Exhibit 8-6 alternative).

7. What is throughput? Provide a conceptual definition as well as a calculation. (See MAAW's Chapter 8 or the Ruhl summary and graphic view). (See summary of The Goal Chapter 8 and Chapter 10). (For an example of throughput in healthcare see the Kershaw summary).

8. What is inventory in the theory of constraints? (See MAAW's Chapter 8 or the Ruhl summary and graphic view). (Also see the summary of The Goal Chapter 8 and Chapter 10).

9. How is net profit increased in TOC? (Three ways.) (See the Ruhl summary).

10. What is the order of importance of the three methods of increasing net profit in TOC? (See the Ruhl summary).

11. In reference to question 10, what is the order of importance in traditional cost accounting? (See the Ruhl summary).

12. How is the TOC measure of ROI = (T-OE)÷I = NI÷I different from Dupont’s measurement, i.e., (Margin)(Turnover) = (NI÷Sales)(Sales÷Investment) = NI÷I? (See Comparing Dupont's ROI with Goldratt's ROI).

13. Goldratt argues that traditional accounting mixes controllable and uncontrollable costs in cost of goods sold. What does he mean by this?

14. Goldratt argues that accounting measurements (either traditional absorption costing, direct costing, or ABC costing) all rely on a poor, or invalid assumption about value added. What does he mean by this? When is value added in TOC? (For some ideas, see the Ruhl and Baggaley& Maskell summaries).

15. Goldratt argues that throughput accounting produces the most conservative and objective income statements and balance sheets in the context of GAAP. What does he mean by this and what do you think?

16. Does Goldratt confuse book value with market value in his arguments, i.e., questions 15&16?

17. What is a balanced plant? (See Step 3 in MAAW's Chapter 8 and the summary of The Goal Chapter 11).

18. What is Goldratt’s match bowl experiment designed to show? (See the Match Bowl note and Summary of The Goal Chapter 14).

19. Does JIT attempt to balance the plant? It so, how?

20. What does Goldratt mean by balancing the flow? (See Step 3 in MAAW's Chapter 8).

21. What is the difference between activating and utilizing a resource? (See Rules for scheduling in MAAW's Chapter 8).

22. Why is time saved at a non-constraint resource or non-bottleneck an illusion? (See Rules)

23. What is Goldratt’s prescription for increasing throughput? (See Chapter 8).

24. What is the drum-buffer-rope method? What do the drums, buffers and ropes represent? (See Drum-Buffer-Rope System and the Huff summary).

25. According to Goldratt, what is wrong with the concept of a cost center? (See the summary of Westra, Srikanth and Kane).

26. Why does Goldratt advocate placing a quality control emphasis in front of a bottleneck?

27. In traditional absorption costing, what happens to NI when the product inventory (i.e., work in process and finished goods) increases? Why? (See the Pop Company problem for questions 27-30).

28. What happens to NI when the product inventory decreases in absorption costing? Why?

29. In throughput costing, what happens to NI when the product inventory increases? Why? (See the Pop Company problem for questions 27-30).

30. What happens in throughput costing when the product inventory decreases? Why?

31. Does ABC encourage, or discourage product diversity? Why?

32. Does TOC encourage or discourage product diversity? Why?

33. Goldratt argues that there is no such thing as a product cost and wants to purge the term "product cost" from our vocabulary? Why? (See Goldratt 90 summary).

34. Compare Goldratt’s five step approach to the Deming-Shewhart PDSA cycle. (See MAAW's Chapter 8 for TOC Steps, the PDSA graphics and the Kershaw graphic).

35. Goldratt argues "don’t think cost, think throughput". Why? (See the Goldratt 92 summary). If product costs are not determined in TOC, how are products priced? (See the Baggaley & Maskell summary).

36. Is the goal in TOC too narrow? Discuss the issue. (See the Handy 2002 summary).

37. What are some ways to exploit a constraint? (See Step 2 in MAAW's Chapter 8 and the Kershaw summary).

38. What does it mean to break a constraint?

39. What is a floating bottleneck? What causes this to occur? (See the Match Bowl note and the summaries of The Goal Chapters 18 and 19 and Chapters 11-14).

40. Why is Goldratt opposed to compromise? (See Goldratt 90 summary).

41. Discuss TOC in relation to JIT. Is there a conflict between the philosophies and the various practices associated with each? (See the Comparison and see the Goldratt 92 summary).

42. Goldratt is critical of the JIT emphasis on non-financial measurements of performance. What is his argument? (See Chapters 10 and 24 of the Haystack Syndrome summary).

43. Discuss the concept of variability in relation to TOC and JIT.

44. Some authors argue that TOC and ABC can be integrated. What is the main argument related to this view? (See the summaries by Holmen, Huang, Coate and Frey, Demmy & Talbott, Kee, MacArthur 93, Campbell 95 and Campbell, Brewer & Mills).

45. Other authors argue that accounting professionals cannot agree with both TOC and ABC and that those who discuss integration focus on the wrong issue. What is the relevant issue according to these critics? Discuss this opposing viewpoint. (See the ummaries of Louderback & Patterson, Corbett, Westra, Srikanth & Kane and Goldratt 92).

46. What is the Evaporating Cloud Method? What is the purpose and how does it work? (See the Goldratt 90 summary).

47. What is the Effect-Cause-Effect Method? What is the purpose and how does it work? (See the Goldratt 90 summary).

48. What is the Socratic Method? Why does Goldratt advocate using the Socratic method? (See the Goldratt 90 summary).

49. What is the goal of the product mix decision in TOC? See the TOC Problems.

50. How is the product mix determined in a TOC system? See the TOC Problems.