BUS 630: Managerial Accounting
The Theory of Constraints
Apply the Theory of Constraints to your own working environment (past or
present). Explain why your organization doesn’t have unlimited resources (space,
a24zagywb7666einventory, product line, etc). Explain why there are always limits
to what your organization can do. Respond to at least two of your fellow students’
Noreen (2011) denotes a constraint as “anything that prevents one from getting more of what
they want; thus, the theory of constraints is based on the insight that effectively managing the
constraint is a key to success” (p. 10).
Volunteering for a nonprofit organization, I see money as
the main constraint that we face. Being an organization based solely on charitable contributions,
we do not have access to unlimited resources. The limits of what our organization can offer are
defined by these contributions and tend to fluctuate when the economic climate fluctuates. When
citizens are financially stable, they are more able and willing to donate to our organization;
conversely, when people are struggling financially, their charitable donations seem to diminish.
Noreen (2011) suggests an organization should focus its efforts on the weakest link in order to
bring the biggest benefits” (p. 10). Although we would like to be able to do more for our citizens,
we are only able to provide a certain level of support to our community, and that level of support
is based on the amount of cash we bring in through donations and fundraising.
In order to strengthen the process in which we operate, we would need to start by improving the
biggest weakness; which, in our case, is declining donations.
Instead of simply hunkering down
and hoping for better results in the future, we can organize more fundraisers, in addition to
requesting government funding, so that we can continue to thrive and grow despite difficult
Noreen, E. W., Brewer, P. B., Garrison R. H. (2011).
Managerial accounting for
(2nd ed.). New York, NY: McGraw Hill
M.K. Gallant is president of Kranbrack Corporation, a company whose stock is
traded on a national exchange. In a meeting with investment analysts at the
beginning of the year, Gallant had predicted that the company’s earnings would
grow by 20% this year. Unfortunately, sales have been less than expected for the