Purpose-The purpose of this paper is to implement an integrated activity-based costing (ABC) and theory of constraints (TOC) approach to enhance decision making in a Lean company. Design/methodology/approach-Based on the literature, this paper proposes an integrated ABC and TOC approach and applies it to a Lean plastic manufacturing company to improve its product-mix decision. Findings-The results of the case study show that the current conventional product-mix decision used by the company and the proposed integrated approach can give significantly different results concerning the optimal product-mix and the associated bottlenecks. Moreover, the paper suggests that managers who implement Lean production without utilising a supportive management accounting system may experience disappointing financial results. Research limitations/implications-The validation of the suggested method is based on a single case study with an action research approach. For future research, the authors suggest the implementation of the approach in different industries. Practical implications-Overall, the integration of ABC and TOC provides managers with an accurate, timely and reliable tool that can help in making decisions about pricing, production line development, process improvements and product-mix. Originality/value-This paper contributes to Lean and management accounting literature by demonstrating the value of a method of integrating ABC and TOC. Also a case study is chosen for the empirical aspect of the study as there are no case studies available in the literature that illustrate a real life case of integrating ABC and TOC within Lean companies as an alternative to the current used cost accounting systems.
|Journal||International Journal of Quality and Reliability Management|
|Publication status||Published - 2014|
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- activity-based costing
- case study
- lean context
- theory of constraints