According to the theory of constraints, which of the following is an operational measurement that can be used to measure the firm's ability to make money?
A) Net profit
B) Throughput
C) Return on investment
D) Sales
E) Direct labor hours

Question

Quizplus · Accepted Answer

Throughput is the rate at which a system generates money through sales, less the variable costs directly incurred by those sales. It is a key operational measurement used in the theory of constraints to measure a firm's ability to make money. A higher throughput means more sales (revenue) are being generated at a faster rate, and if variable costs are managed effectively, this translates into higher profitability for the firm. Net profit, return on investment, sales, and direct labor hours are also important measurements, but they are not specifically used to measure a firm's ability to make money according to the theory of constraints.

According to the Theory of Constraints, Which of the Following