Index

Absolute efficiency, 118

Accounting, 31

    concessions, 14

    cost, 5, 15, 76, 78, 85

    data in foresight, 72–76

    data in hindsight, 71–72

    versus effciency, 25

Accounting Matrix, 5

Accrual accounting rules, 27

Activity-based costing, 15, 37, 101

Average cost per unit, 115

 

Balance sheet, 8

Black belts, 19

Business, operates, 8

Buying capacity, transaction types, 44

 

Capacity, 99, 100, 101

    cost dynamics of, 65–69

    dynamics, understanding basics of

        effectiveness of, 59–60

        efficiency of, 58–59

        productivity of, 60

    efficiency, 75

    managerial information from, 77

        intersection between operations and accounting, 85–86

        modeling, 78–80

        models operations more effectively, 80–84

    modeling, 77

Capacity units (CU), 99

Cash, 100, 101

    based change, 114

    based financial value, 101

    benefit, 111

    and decision-making, 35–36

        arbitrary relationships, 40–41

        forced relationships, 36

        losing track of relationships, 36–37

        meaningless numbers, 37–39

        no single cost, 39–40

        no ties to cash flow, 41

    focusing using capacity, 97–98

    generating, 7, 12

    revenue, 101

    transaction, 18, 48

Cash flow, 7, 14, 25, 29, 43, 56, 57, 61, 68, 69, 111

    versus cost_NC, 39

    managing, 9

    modeling, 77, 78

    statement of, 8

Cash flow cost (cost_C), 19–21

Certified public accounting (CPA), 16

Constraint-based scheduling, 117

Contribution margins, 94–95

    scope of analysis, 96–97

Cost, 100

    accounting, 5, 15, 76, 78, 85

        approaches, 35–36

    allocation technique, 63

    calculating, 20, 40–41

    definitions of, 11, 17–20, 93

    determination of, 48

    dynamics of capacity

        conclusion, 69

        less purposeful, 66–69

        purposeful allocation techniques, 65–66

    efficiency, 11–12

    as effort, 19

    of goods, 95

    management, 110–111

    reduction, 23, 110–111

    savings, 12

Cost_C, 24, 54, 57, 59, 61, 62, 67, 69, 73, 75, 76, 78, 80–85, 93, 96, 109–110

Costing

    practice of, 10, 15–16

    primary focus of, 54

Cost_NC, 24–25, 27, 29, 37–38, 40–41, 56, 61, 65–69, 75, 76, 78, 80, 99, 101, 110, 111

CPA. See Certified public accounting

Customer profitability, 101

 

Demand efficiency, 117

Depreciation, 12, 31–32

 

Earnings, reporting, 7–8

ECD. See Explicit cost dynamics

Effectiveness of capacity dynamics, 59–60

Efficiency, 23–25, 100, 102, 105–107, 113

    absolute, 118

    capacity dynamics, 58–59

    definition of, 115

    demand, 117

    overall, 117

Exchange of cash, 19

Explicit cost dynamics (ECD), 93–94, 101, 102

    contribution margins, 94–95

        scope of analysis, 96–97

    fixed and variable costs, 95–96

    focusing on cash using capacity, 97–98

    revisited, 89–92

    scope of analysis, 96–97

 

Financial accounting, 10

Financial viability, 8

Finished goods inventory, 28–29

Fixed costs, 95–96

Foundations, 7–8

    cash, generating, 7

    earnings, reporting, 7–8

 

GAAP. See Generally Accepted Accounting Principles

Generally Accepted Accounting Principles (GAAP), 10

 

Hostile group dynamics, 90

 

Improved investment, 111

Income statement, 8

Input capacity, 47–51, 93

    cash transactions, 48

    consumption of, 53–54

    cost determined, 48

    cost independent, 48–51

Internal Revenue Service (IRS), 8

Inventory, 27–29

    building, 12, 28–29

    types of

        finished goods, 28–29

        raw materials, 27

        work-in-process, 27–28

Investments

    community, 8

    improved, 111

Investors, 7

IRS. See Internal Revenue Service

 

Lean accounting, 11, 15, 19, 23, 75

Less purposeful cost assignment, 66–69

LinkedIn, 38

 

Managerial information from capacity, 77–86

Modeling cash, 78–80

Money, making, 9–12

 

Net cash, 9

Non-cash cost (Cost_NC), 19–21, 39

Numbers, and financial values, 20–21

 

Obligations, transaction types, 44–45

Ohno, Taiichi, 23

One-off scenarios, transaction types, 44

Operational data, 81

Output capacity

    consuming input, 53–54

    no cash transaction, 54

Overall efficiency, 117

 

Pricing, 109

Productivity of capacity dynamics, 60

Product line profitability, 101

Profit, 9–12, 100–101, 106

    accounting, 94

    calculation of, 13, 32

    cost definitions of, 11

    costing, practice of, 10

    depreciation, 12

    dynamics of, 109–110

    efficiency, 11–12

    equation, 9

    inventory, 12

    revenue recognition, 10

Purposeful allocation techniques, 65–66

 

Raw materials inventory, 27

Real, definition of, 3

Revenue, 100, 109, 110

    recognition, 10, 13–14

ROI, calculation of, 39

 

Sales, as proxy, for incoming cash, 14

Sales, general, and administrative (SGA), 41

SEC. See Securities and Exchange Commission

Securities and Exchange Commission (SEC), 8

Segal’s law, 16

SGA. See Sales, general, and administrative

Six sigma, 11, 19, 75

Standard costing, 15

Static capacity. See Input capacity

 

Throughput accounting, 15

Transactional costs, 101, 110

Transactions and capacity, 43–45

 

Variable costs, 95–96

 

WACA. See Worth and capacity analysis

Waste reduction activities, 11

Work-in-process, value of, 27–28

Worth and capacity analysis (WACA), 107

Worth, 102–105

    efficiency, 102, 105–107

    explicit cost dynamics, 101

    understanding, 99–102