There are no prerequisites.

Course Description

The financial results of a business are strongly influenced by its constraint. A constraint is the bottleneck that restricts an organization from achieving its goals. Without proper attention to the constraint, investments seem to have no effect, expense reductions cause profits to decline, and delivery dates continually slip. Constraint Management reveals how to overcome these issues through proper utilization of the bottleneck. This involves designing the entire organization to support the constraint, which requires alterations to staffing, inventory positioning, investments, controls, measurements, and more.

Constraint Management is intended for anyone involved in financial analysis, accounting, and production management. It can also be useful for those in executive positions who are searching for a better way to run their organizations.


Steven M. Bragg, CPA

Steven M. Bragg, CPA, is a full-time book and course author who has written more than 70 business books. He provides Western CPE with self-study courses in the areas of accounting and finance, with an emphasis on the practical application of accounting standards and management techniques. A sampling of his courses include the The New Controller Guidebook, The GAAP Guidebook, Accountants’ Guidebook, and Closing the Books: An Accountant’s Guide. He also manages the Accounting Best Practices podcast.

Steven has been the CFO or controller of both public and private companies and has been a consulting manager with Ernst & Young and an auditor with Deloitte & Touche. He holds an MBA from Babson College, a Master of Finance from Bentley College, and a BA from the University of Maine (summa cum laude).

Course Specifics

Aug 30, 2018
There are no prerequisites.

Compliance Information

Qualifies for CA Fraud: No

Learning Objectives

Upon successful completion of this course, participants will be able to:

Chapter 1

  • Identify common assumptions of a traditional management system
  • Determine what is likely to happen when all resources are optimized
  • List items necessary to calculate throughput
  • Name an example of local optimization 

Chapter 2

  • Identify the presence of a constraint and how it can be designated
  • List ways to deal with employee turnover as a constraint
  • Define the expedite zone and its purpose

Chapter 3

  • Identify why adding staff may not increase sales and what hiring practices can help
  • List a key problem that causes delays in projects
  • Specify where the time buffer of a project should be located

Chapter 4

  • Cite the result of a culture of cost reduction
  • Specify why direct labor is not a variable expense
  • Identify why scrap is more expensive if discovered after the constraint

Chapter 5

  • Identify how the SEC issues accounting guidance
  • List similarities in guidance on manufactured goods between GAAP and IFRS
  • Cite an example of variable overhead

Chapter 6

  • List measurements used to measure relationships between throughput and constraints
  • Define the term for the amount of inventory buffer in use at any time
  • Cite problems with the traditional inventory turnover calculation
  • Name a harmful measure that is sometimes used to make business decisions

Chapter 7

  • Identify costs to be excluded from product cost analysis
  • List a cost unique to the sales channel
  • Define the cost object associated with returned goods and early payment

Chapter 8

  • Name an event that might trigger a controls review
  • List reasons for using controls and which controls are most useful

Chapter 9

  • Cite the type of project that would not be used on a capital request form
  • List problems with top-down and bottom-up approached to revenue estimation
  • Calculate direct labor using the crewing method
  • Identify where support for the constraint concept comes from

Chapter 10

  • Define rolling forecast
  • Specify the basis for bonus compensation
  • Identify where increases to throughput occur

Chapter 11

  • Identify the key limiting factor in a constraint
  • Cite ways that a business's financial results can be enhanced
  • Classify the type of pricing that absorption pricing is

Chapter 12

  • Identify the type of customers that are desirable in a constraint-based pricing environment
  • Cite a solution for lengthy setup times at a constraint
  • Specify the effect of having a constraint in the marketplace

Chapter 13

  • Cite which factor should be used to determine which investments to make
  • Specify constraint management tactics for volatile industries
  • Cite when competition is likely to cut prices in response to your own reduction

Chapter 14

  • Identify when a speed of delivery strategy is most useful
  • Cite situations when constraint management is effective in the acquisition process
  • Specify when organizations in financial distress may choose to implement constraint management

Table of Contents


Chapter 1 – Overview of Constraint Management

Learning Objectives


Constraint Operational Terminology

Overview of the Constraint

The Throughput Concept

Types of Constraints

Local Optimization

The Capacity Concept

Types of Capacity

Location of Excess Capacity

Production Scheduling

The Cost of the Constraint


Chapter 1 – Review Questions

Chapter 2 – Production Basis of Constraint Management

Learning Objectives


Location of the Constraint

Constraint Management

Additional Staff

Constraint Scheduling

Processing Quality


Merged Operations

Off-Load Work

Quality Inspection

Redesign Products

Add Capacity

The Inventory Buffer

Buffer Sizing

The Expedite Zone

The Assembly Buffer

Buffer Holes

Dynamic Buffering

The Buffer Manager

Sprint Capacity

Production Scheduling

Scheduling Demands

Scheduling Priorities

Reasonable Constraint Time

Raw Materials Release

Labor Considerations

Batch Sizes


Summary of Scheduling Activities


Chapter 2 – Review Questions

Chapter 3 – Constraints in Other Departments

Learning Objectives


Sales Department Constraints

Engineering Department Constraints

Executive Constraints

Project Management Constraints


Chapter 3 – Review Questions

Chapter 4 – Comparison to Traditional Cost Analysis

Learning Objectives


The Traditional Cost Focus

The Traditional Capacity Focus

The Gross Margin Focus

Treatment of Setup Costs

Treatment of Direct Labor

Treatment of Scrap Costs

Treatment of Low-Margin Products

Assignment of Costs to Inventory

Allocation of Corporate Overhead

Variance Reporting

Comparison of Direct Costing to Constraint Management

Comparison of Activity-Based Costing to Constraint Management


Chapter 4 – Review Questions

Chapter 5 – Comparison to Accounting Frameworks

Learning Objectives


The GAAP and IFRS Frameworks

Differences between Constraint Management and the Accounting Frameworks

Direct Labor and Factory Overhead

Variable Overhead

Asset Treatment

Income Statement Layout

Step 1 – Assign Materials Costs to Inventory

Step 2 – Assign Direct Labor Costs to Produced Units

Step 3 – Allocate Factory Overhead to Produced Units

Step 4 – Calculate Change in Ending Inventory Cost

Step 5 – Produce Adjusted Income Statement

Data Storage Issues


Chapter 5 – Review Questions

Chapter 6 – Constraint and Throughput Measurement

Learning Objectives


Constraint Utilization

Constraint Effectiveness

Constraint Schedule Fulfillment

Buffer Penetration

Constraint Maintenance to Operating Ratio

Constraint Rework Processing

Post-Constraint Scrap

Manufacturing Effectiveness

Manufacturing Productivity

Manufacturing Effectiveness

Manufacturing Throughput Time

Order Cycle Time

Delayed Throughput

Inventory Turnover

Quoted Throughput

Proportion of Quoted Throughput Won

Sales Productivity

Measurements to Avoid


Chapter 6 – Review Questions

Chapter 7 – Constraint and Throughput Reporting

Learning Objectives


Cost Object Reporting

The Product Cost Object

The Product Line Cost Object

The Sales Channel Cost Object

The Customer Cost Object

Trend Line Analysis

Buffer Penetration Report

Buffer Management Report

Reports to Avoid


Chapter 7 – Review Questions

Chapter 8 – Constraint Controls

Learning Objectives


The Basis for Controls

Preventive and Detective Controls

Manual and Automated Controls

Constraint Controls

Scrap Controls

Buffer Controls

Production Flow Controls

Supplier Controls


Chapter 8 – Review Questions

Chapter 9 – Constraint-Based Budgeting

Learning Objectives


Overview of Capital Budgeting

The Capital Request Form

Capital Budgeting from a Constraint Perspective

Additional Capital Budgeting Analysis

Capital Budgeting Approvals

Format of the Fixed Asset Budget

Revenue Budgeting

Product-Based Revenue Budgets

Service-Based Revenue Budgets

New Product Introductions

Direct Labor Budgeting

Traditional Labor Calculation Method

Crewing Method

Direct Labor Adjustments for the Constraint

Operating Expenses Analysis

Report Restructuring

Zero-Base Budgeting


Chapter 9 – Review Questions

Chapter 10 – The Ideal Constraint Management Environment

Learning Objectives


Senior Management Support

To Budget or Not to Budget

The Bonus Plan

Marketing Issues

The Single-Person Constraint

Union Work Rules

Policies that Help Constraint Management

Production Policies

Cost Reduction Policies


Chapter 10 – Review Questions

Chapter 11 – Financial Analysis Issues

Learning Objectives


Constraint Analysis Financial Terminology

Constraint Analysis from a Financial Perspective

The Constraint Analysis Model

Production Analysis

Increase Downstream Capacity

Increase Upstream Processing

Increase Upstream Capacity

Placement of a Quality Inspection Point

Add Staff to the Constraint

Outsource to a Supplier

Product Analysis

Add a Product

Terminate a Product

Other Analyses

No Internal Constraint

Allocate Based on Raw Material Availability


Chapter 11 – Review Questions

Chapter 12 – Constraint-Based Pricing

Learning Objectives


Pricing Strategies

Cost-Based Pricing Strategies

Value Pricing Strategies

Teaser Pricing Strategies

Strategic Pricing

Burdened Cost versus Throughput Pricing

Throughput per Minute

Pricing for a Lengthy Setup Time

Price Modeling

Pricing when there is no Constraint Impact

Pricing when there is no Constraint

The Decision to Sell at a Lower Price

The Decision to Enter into a Long-Term Contract


Chapter 12 – Review Questions

Chapter 13 – Constraint Management Decisions

Learning Objectives


Investment Decision Priorities

Priority 1 – Increases Throughput

Priority 2 – Reduces Invested Funds

Priority 3 – Reduces Expenses

Additional Investment Considerations

Designing the Organization around the Constraint

Price Reductions

Inventory Build Decisions

Raw Materials Decisions

Work-in-Process Decisions

Finished Goods Decisions

Deliberate Production Delays

Target Costing Decisions


Chapter 13 – Review Questions

Chapter 14 – Constraint-Based Strategy

Learning Objectives


Speed of Delivery Strategy

Product Proliferation Strategy

Acquisition Strategy

Bankruptcy Prevention Strategy


Chapter 14 – Review Questions

Review Question Answers and Rationales



Qualified Assessment

Answer Sheet

Course Evaluation


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