Theory of Constraints Throughput Accounting and Measurements

Throughput (T), Inventory (I), Operating Expenses (OE), along with T/CU where CU is constraint units are some of the key measures in Theory of Constraints and Throughput Accounting.

In Throughput Accounting truly variable costs (TVCs) are separated from fixed costs or operating (OE). And one of the biggest difference between Throughput and Gross Margin is that Gross Margin includes direct labor. In Throughput Accounting direct labor is included in OE. This distinction is extremely important to determining and ensuring profitability of any organization.