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Question 439

Which of the following statements best represents a supply chain approach to cost accounting using the theory of constraints (TOC)?

It tends to only focus on the actual running costs of the constraint.

It forces cost reduction efforts on all operations because they all may become constraints.

It tends to not allocate overhead to costs, making the accounting closer to cash flow.

It tends to view all costs of poor quality as sunk costs for the entire operation.

Correct Answer: C

The best statement representing a supply chain approach to cost accounting using the theory of constraints (TOC) is that it tends to not allocate overhead to costs, making the accounting closer to cash flow. The TOC approach emphasizes improving the flow of products and services through the supply chain and focuses on identifying and managing constraints. This approach typically avoids complex traditional cost accounting methods, such as allocating overheads, and instead aligns costs closer to actual cash flow.

Discussion

Rajiv8047Option: C

It tends to not allocate overhead to costs, making the accounting closer to cash flow.

DaesmaOption: C

This is one of the fundamental principles of TOC in cost accounting. TOC views cost accounting more directly and focuses on cash flow rather than indirect cost allocation.