TOC: Cost Accounting

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In determining the costs for parts, traditional accounting factors in the past twelve months. Over the past two months the company has made a significant turnaround so factoring in the past twelve months is going to make it look like cost for parts is increasing. By using information from over the past two months, it will be a lot more representative of what is really going on with the company. The conflict here is that the traditional costing personnel will not buy it. Conflicting parties are the accounting department and Alex Rogo. (Pages 240-241)

D: use costing information over the past two months
D': follow the traditional costing procedures and use costing information over the past 12 months
B: show that there have been big increases in throughput
C: follow the accounting rules of the company
A: keep the plant from being shut down
Click on the icons on the arrows to see assumptions and injections
In order to keep the plant from being shut down I must show that there have been big increases in throughput and in order to show that there have been big increases in throughput I must use costing information over the past two months. But, in order to keep the plant from being shut down I must also follow the accounting rules of the company and in order to follow the accounting rules of the company I must follow the traditional costing procedures and use costing information over the past 12 months. I can't both use costing information over the past two months and follow the traditional costing procedures and use costing information over the past 12 months.
RelationAssumption(s)Injection(s)
D-D'1. Management is looking for one set of numbers to represent cost accounting.

2. They will be two completely different numbers
1. Management could look at both numbers
B-D1. The information over the past two months are more representative of whats really going on

2. The plant is a lot different now than it was 12 months ago
1. Compare current numbers to numbers 12 months ago
C-D'1. If not followed the responsible parties could be in deep trouble.

2. This is the way that costing has always been done
2. The way that cost accounting is done could be changed
A-B1. Top management is basing its decisions on measures of throughput

2. If throughput is increased top management could see potential in the plant
2. Find a way to show these increases in throughput to the right people
A-C1. Rules are there for a reason and must be followed

2. Because these accounting rules are compared to other companies using the same accounting rules
If explained correctly, top management may see where the idea of different costing is coming from and change the rules