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Vegueta. Anuario de la Facultad de Geografía e Historia
22 (4), 2022, 1474-1485
eISSN: 2341-1112
The role of the Activity Based Budget Time Driven to apply Throughput
Accounting (An Applied Research In Wasit Textile And Knitting Factory)
Sura Waleed Ismael Elias
*
, Prof. Dr.Thair Sabri Mahmoud Al- Ghabban
Higher Institute of Accounting and Financial Studies
Email
*
: Sari.khodair1601@pgiafs.uobaghdad.edu.iq
Abstract
The research aims to apply the method of Throughput Accounting with the contribution of the Activity
Based Budget Time Driven (TD-ABB) for the woven fabric department (polyester blended - polyester
150/1) in the Wasit Textile and Knitting Factory. The problem of the research is that the research
sample laboratory does not apply modern cost management methods represented in the the Activity
Based Budget Time Driven (TDABB), as the Iraqi economic units suffer from their inability to compete
in the labor market in light of the competitive environment, and the research was based on a basic
hypothesis that The application of the budgeting method the Activity Based Budget Time Driven
(TDABB) has a role in applying the method of throughput accounting for the product of polyester and
polyester blend fabrics 150/1. Through the research, a set of conclusions was reached, the most
important of which is: The application of the Activity Based Budget Time Driven (TDABB) based on
time as a basic guide in distributing the cost of resources to the objectives of cost management, and
then the outputs of this method of information are characterized by their accuracy and be more
detailed, as the most dependent on this method is time, as time is one of the main success factors of
the unit Economic and based on the times specified in the preparation of the budget highlights its role
in applying the method of throughput accounting by calculating the completion time for each product.
Reaching a set of recommendations, the most important of which are: Applying the method of
throughput accounting by considering the variable costs only the cost of raw materials and thus
achieving a high of achievement for a textile and weaving factory Wasit. As for the rest of the cost
elements of direct wages and indirect costs, they are considered operating expenses.
Keywords: Activity based budget time driven(TDABB), throughput accounting
Introduction
The contemporary business environment has witnessed great changes as a result of technological
developments in various means, equipment and machines, which imposed a new burden on traditional
administrative and cost accounting with the emergence of strategic cost management techniques that
correspond to the variables of the modern business environment in light of the increasing competition,
and based on the foregoing, cost and management accounting methods became The traditional ones
are not suitable for generating appropriate information for making decisions, which requires
searching for alternative approaches to eliminate the deficiencies in the traditional administrative cost
accounting, and because the cost of the products of the Wasit Textile and Knitting Factory is high,
especially with regard to the process of producing polyester fabrics, the economic units should apply
different techniques in Administrative accounting and cost accounting, in order to determine the
planned cost of the product, through time and cost management, and in turn contribute to the
application of the throughput accounting. Therefore, this research came to try to find solutions that
can be applied in the local industrial environment by adopting the application of the activity based
budget time driven (TDABB) to apply the method of throughput accounting through four sections. The
first topic focused on the research methodology, while the second topic focused on the aspect
Theoretical, activity based budget time driven method (TDABB) and internal activities revenue
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accounting method. The third topic came on the practical side, applying the activity based budget time
driven method and its role in applying the throughput accounting method, while the fourth and final
topic focused Presenting conclusions and recommendations.
The first topic: research methodology
1-1 Research Methodology
1-1-1 Research problem: The research sample laboratory does not apply the activity based budget
time driven (TDABB). Thus, the research problem appears through the following question:
Does the application of the activity based budget time driven method (TDABB) in the Iraqi economic
units have a role in throughput accounting?
1-1-2 Objective of the research: This research aims to achieve the following:
1- Application of the activity based budget time driven method (TDABB) in a Wasit textile and knitting
factory.
2- Applying the throughput accounting method by applying the activity based budget time driven
(TDABB) method.
1-1-3 The importance of research: The importance of research is crystallized in the importance of
applying the activity based budget time driven (TDABB) as one of the modern cost management tools
because of the information it provides that contribute to the redistribution of indirect costs to reach
the real planned cost of products and reduce their cost to meet changes Rapid in the manufacturing
environment and the application of the method of throughput accounting.
1-1-4 Research hypothesis: The research stems from a main hypothesis that the application of the
activity based budget time driven (TDABB) has a role in the application of throughput accounting of
the polyester product
1-1-5 Spatial and temporal limits: In completing the practical aspect, the researcher relied on
financial statements, cost records, production reports and quality control for the year 2019 and they
include:
The spatial boundaries where the research was applied in the Wasit Textile and Knitting Factory of the
General Company for the Textile and Leather Industry
a. The time limits where the data for 2019 was used because it is the latest data issued by the factory.
1-1-6 The quantitative analysis method, which is based on real data from factory reports and
records, was used.
The second topic: The theoretical aspect: the TDABB method and the method of accounting for the
return of internal activities
2.1 Time-Driven Activity Based Budgeting (TDABB) Approach
1.1.2 Concept of activity based budget time driven method
The activity based budget time driven works on estimating the resources that the economic unit will
need based on the expected size of the cost objectives, by applying the time equations that were
reached when building the cost model, down to the cost of resources, and the budgeting method based
on activities Time-oriented several definitions and cover the different viewpoints of my researchers
and agencies:
Where (Kaplan & Anderson:) defined it as “a future plan that plays a key role in setting the unit’s
policies through the planning and control processes, in addition to performing its role in terms of
determining the costs of activities according to the expected directions of each activity, which are
determined by time equations” (Kaplan & Anderson , 2004 : 15-16)
As defined by (Blocher) as “a method for preparing the budget that is used in conjunction with the
costing on the basis of time-oriented activity in that it works inversely based on estimating the sales
volume in order to determine the resources needed to support production and sales plans and using
time equations that illustrate the times of the various activities events (Blocher, et. al., 2019 : 380-381)
From the foregoing, we can conclude that activity based budget time driven (TD-ABB) is an alternative
method to reach sound expectations regarding resources and activities and determine the time and
time directions of activities as a future plan that plays a key role in setting unit policies through
planning and control processes by relying on activity based budget time driven (TDABC) method.
2.1.2 Steps to Apply Time-Driven Activities Based Budgeting (TD-ABB)
To apply the activity based budget time driven method (TD-ABB), the following steps should be
followed: (Al-Daami, 2021: 66-67)
1. Forecasting sales and production quantities for the next period on the basis of which the time
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vectors related to the product are expected.
2. Determining the different groups of resources (departments and divisions) including the activities
they contain that consume those resources.
3. Forecasting the total costs of resource groups, including (direct and indirect costs) that correspond
to the performance of the activities carried out by all persons who participate in production.
4. Determining the requirements related to the energy of different resources, and scientific and
applied research indicates that the percentage approved as practical energy from the theoretical
energy is 80%.
5. Calculate the planned energy cost rates, which are the unit time cost of each resource group, by
dividing the total costs of each resource group (Step 3) by the energy of each resource group (Step 4).
(total costs)/energy = time unit cost
6. Setting the expected amounts of time vectors related to activities and their events, on the basis of
which time equations are prepared. It should be noted here that the time equations for the budget
period can be modified, especially if there are improvements in the various processes that would
reduce the time required to perform activities or if there are activities New ones are added to the
processes.
7. Calculate the total planned cost of the resources required to meet the expected demand for
products by multiplying the planned cost per unit time (in minutes) for each resource group (step 5)
by the time of the event of each activity (step 6).
Planned total cost = unit time cost x time each activity takes place
8. Calculating the cost of products by summing the costs of materials, direct wages, and indirect costs
allocated to the departments.
Product cost = material cost + wage cost + allotted indirect costs
2-2 The concept of Throughput accounting
Throughput accounting (TA) is one of the management accounting tools, which is based mainly on the
principles of the theory of constraints, and mainly focuses on managing the constraints imposed on the
operations of the economic unit, and its work is considered complementary to the management system
by providing all the information that managers need for management And control the constraints of
the economic unit. (84: 2015, Elsukova), and many writers and researchers presented the definition
of Throughput accounting , where Kadhim defined “it is a modern concept in managerial accounting to
support the theory of constraints. In determining and measuring the cost of production and sales and
increasing productivity” (Kadhim, et.al, 2020: 765).
From the above, it can be concluded that throughput accounting is one of the methods of managerial
accounting, a tool to provide measures of production efficiency by identifying and addressing
restrictions and bottlenecks, which helps in providing a set of indicators to understand whether the
activity has increased sales to the maximum, and reduces response time, It achieves quality, reduces
inventory and all operating expenses and assists management to make decisions and perform cost and
profitability analysis
1.2.2 Assumptions of Throughput accounting
For the purpose of linking the of achievement and its cost, accounting for the Throughput accounting
depends on a set of assumptions: (Al-Shaabani and Al-Hayali, 2018: 519)
1. The of achievement occupies the first place in the order of priority alternatives to the decision, and
then reducing the amount of money invested in the stock, and finally reducing operating costs, so that
the economic unit can maximize the of achievement with the aim of maximizing total profits.
2. Considering operating costs in the short term as predetermined costs, and thus they are considered
fixed costs that are charged over the time period and are not allocated to products.
3. The cost of direct materials is affected by the difference in the volume of production, and therefore
it is the only variable cost component, and therefore it is taken into account when calculating the of
achievement.
4. Maximizing the overall objective of the economic unit, through three main and successive
objectives, which are to increase the volume of sales to the maximum extent possible (maximizing the
of achievement), and then reduce the levels of inventory of all kinds to the minimum possible, and then
reduce operating costs in the last rank of priorities for Throughput accounting
2.2.2 The importance of Throughput accounting
The importance of throughput accounting can be summarized as follows: (Woeppel, 2010: 6)
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1. Increase revenue (achievement), improve cash flow (investment) and provide capacity (operating
costs), and monitor all management decisions on the basis of expected changes in achievement,
investment and operating costs.
2. It offers the management of the economic unit a more balanced approach to decision-making, and
gives a better picture of the results of decisions.
3. It guides management on better ways to make pricing and marketing decisions more profitable.
4. Maximizing achievement and profitability, focusing on improving the flow in the production
system, and providing feedback on the financial impact of restricted resources, prompting
administrative decisions to improve the efficiency of constraint and ensuring that all the resources of
the economic unit support the constraint so that those profits can be maximized.
5. It provides a method for measuring efforts to improve productivity, and how it affects cost and
achievement, and it can be applied to decisions that affect all aspects of the economic unit.
3.2.2 Objectives of applying Throughput accounting
Throughput accounting seeks to achieve a set of goals, which are as follows: (Shaibo, 2019: 138) (Fadel,
2020: 49)
1. Increasing the efficiency of the completion rate of the economic unit operations: by using financial
measures in the optimal exploitation of potential opportunities in order to reach the target units within
the unit time.
2. Measuring and determining the cost of goods or services produced or provided by the economic
unit by specifying the cost items that are easy to allocate to those goods or services, in addition to other
related costs that are difficult to allocate.
3. Assisting the administration in the planning process: as planning is one of the most important
administrative functions in the units.
4. Performance measurement and evaluation: Assisting management in planning and controlling
costs, as well as assisting management in measuring and evaluating performance.
5. Assessment of efficiency and effectiveness: by basing throughput accountingon sales, a measure is
achieved through which a measure depends on the compatibility between the costs of the restricted
activity and the of achievement and the management's efficiency in improving its market share by
maximizing sales.
6. Providing reports on the product mix cost more accurately than traditional cost accounting because
it is based on three monetary variables (achievement, inventory, and operating costs), which
contribute to the effective management of profits as well as the efficiency of the planning,
measurement, control and performance evaluation function.
4.2.2 Requirements for the application Throughput accounting
Throughput accounting must be governed by a set of components and requirements, as follows:
First: Reclassify the elements of costs
As a result of the increase in investments in machinery and equipment, direct wages tended to
decrease dramatically and may completely disappear from the industrial cost structure with complete
dependence on modern manufacturing technology, and thus raw materials became the only variable
element after the transfer of the cost of direct wages to the side of fixed costs. (, 2012: 75 Cox , James).
Second: Identifying obstacles to production processes
As each unit has a constraint or set of constraints that hinder the system from achieving the required
achievement, and the obstacles to the production process can be divided into two types: (Majercak &
Others, 2013: 899) (Vargas & other, 2017: 3)
1. Restrictions: Since restrictions are not limited to production processes within the economic unit,
but may extend outside it, these restrictions may be external, such as markets or even in the
administrative policies followed in the economic unit, and hence the economic unit must try to deal
with those restrictions and find solutions Therefore, the identification and study of these constraints
is closely related to the measurement process according to the accounting entry for the return of
internal activities, especially if these constraints represent bottlenecks that impede the flow of the
production process within the economic unit.
2. Bottlenecks: They are obstacles to the flow of production processes between production
departments or stages, and they are represented in the points where machines with weak production
capacity are located, that is, they occur when the specific demand for those machines exceeds their
available production capacity.
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Third: Pay attention to the element of time
Time is the ruling element in all sectors, as time has become an important element in the process of
determining costs related to the product, in addition to its control over the possibility of achieving an
effective and rapid response to the customer's requirements and desires in order to achieve a
competitive advantage without competitors, whenever the optimum utilization is achieved.
5.2.2 Standards for Throughput accounting
First, achievement metrics
Achievement refers to the efficiency and effectiveness of performance towards the main objective of
the economic unit, which is to increase sales and maximize profitability. (Al-Anbari, 2018: 21), and the
concept of achievement has three criteria, as follows:
1. Completion rate: It is a measure of the turnover of sales quantity per unit time, which helps the
unit management to identify the activities that take longer and more expensive, and the activities that
hinder the normal flow of production instead of relying only on actual operating rates that may hide
the efficiency of using the total time as one Direct resources and the level of quality of performance in
the production process. (Abdin, 2015: 19) The achievement rate can be calculated by the following
equation:
(Good Sold Units Number)/(Total Manufacturing Time) = Completion Rate
2. Completion achievement: Horngren defines the of achievement as the revenues minus the costs
of direct materials for the goods sold, and based on the of achievement it is possible to judge many
issues related to the operational processes in the economic unit, take decisions related to the
manufacturing process, and determine the product mix that achieves high profitability for the
economic unit (Horgren, 2009). : 540).
Matching sales with variable costs, restricted resources only (Surour, 2017: 392), so that the of
achievement can be calculated through the following equation:
Variable Costs - Sales Revenue = Completion
3. Completion time: It is a measure of the time required for a material part to pass through the
manufacturing process after issuing an order to the manufacturing floor. The completion time consists
of (process time, inspection time, transportation time and waiting time). ( Nordmeyer , 2017 : 1 )
For value other than host time + Run time = Completion time
for non-host value time + for host value time =
The value of the completion time for each product, which represents the actual time to complete the
completed and sold quantities
Selling Price x Sold Units Number x Completion Time Percentage = Sold Products Completion Time
Value
The percentage of the value of completion time, which is the ratio of the value of the completion time
of the product to the total percentages of the value of completion.
(Product completion time value ratio)/(Product completion time percentage total) = Sold product per
achievement time value ratio
Determining the share of each product in the total costs of the products
Products costs total x product sold for each achievement time value percentage = products costs total
from each product share
Second: Inventory metrics
Inventory is all that is invested by the economic unit in the purchase of things for the purpose of selling
them. The main difference between throughput accounting and traditional accounting is how to
evaluate each of the production inventory under operation and the finished production.
(Sales Revenue) / (Duration Last Finished Production Cost) = Inventory Turnover Rate
Third: operating expenses
Operating expenses are defined as the sum of the money spent by the economic unit to convert
investments into realization, and the total operating expenses consist of wages and benefits in kind
paid to employees, including direct and administrative wages, interest paid to creditors, waste, fuel
and electricity, and cases of increase and decrease in operating expenses must be analyzed in each case
on alone and taking into account the impact of these cases (Zabin and Manhal, 2017: 7)
It includes measures of operating expenses, a set of measures, which are as follows: (Mohammed,
2020: 57-58)
Factory efficiency measure: It is that measure that shows the relationship between inputs and outputs.
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(completion)/(material other than industrial costs total)=factory efficiency rate
Direct wages cost efficiency measure: It shows the extent to which the direct wage cost is involved in
the process of transferring inventory to completion, i.e. there is a relationship between inputs and
outputs by labor, and the greater the rate is, the economic unit exploits its restricted resources in an
efficient and profitable manner, and it is calculated through the following equation:
(completion)/(direct wage cost) = direct wage cost efficiency rate
Sales productivity measure: It is used to measure the efficiency of the department, which is the
comparison of the of achievement accomplished by the economic unit in each period to the total
expenses of the sales department. Formulate the equation as follows:
(Achievement)/(Sales Division Expense Total)=Sales Productivity Scale
The third topic: the practical side
3-1 Application of the time-oriented activity-based balancing (TDABB) method for polyester
fabrics
First: Estimating the amount of sales and production
Since the budget is considered a plan for a future period, so preparing it requires an estimate of the
quantities of production and sales of the factory, and through field visits carried out by the researcher
and obtaining data from the Accounts and Planning Department, the quantities of production and sales
were estimated. For polyester product 1/150 200000 linear meters
From the foregoing, it was found that the Wasit Textile and Knitting Factory assumes that everything
produced is sold when estimating production and sales quantities.
Second: Defining resource groups (activities)
It includes all the activities that make up the process of producing woven fabrics.
Third: Determine the total planned costs for each resource group
Fourth: Determine the available practical energy
In this step, the requirements related to the energy of various resources for the coming period are
determined, and based on them, the planned energy cost rates are set, and the practical energy is
determined for each of the main activities as follows:
Annual operational capacity = number of workers x work day (minutes) x number of monthly working
days x months of the year (12)
Fifth: Calculate the planned average cost per minute for each activity
In this step, the planned average cost per unit time is calculated for each activity based on the following
equation:
Unit cost rate = total costs ÷ practical energy per activity
Table (1) Planned vector cost rate per activity for Knitwear Division products for the year 2019
Activities
Activity cost (JD)
working power
(min)
Router cost rate
(JD/min)
the design
8712185
181440
48.01689264
Purchase of
resources
9559731
272160
35.12540785
Material Inspection
7159706
181440
39.46046076
knitting
236824710
1088640
217.5418045
sequel
46979066
816480
57.5385386
koi
24239272
262880
92.20660377
examination
6794159
181440
37.44576168
packing
15953715
272160
58.61888228
Source: Prepared by the researcher
In Table (1), the vector cost rate for each activity was determined by dividing the activity cost by the
practical energy for each activity. The design activity vector cost rate was (48.01689264 dinars/min)
resulting from (8712185 ÷ 181440), and thus it is calculated for each activity.
Sixth: Calculating the cost of the planned activities per linear meter of the woven fabric product
The cost of the planned activities is calculated by multiplying the planned vector cost rate x the
completion time for each activity to get the planned cost per linear meter of the mixed polyester and
polyester product 150/1
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Table (2) shows the total planned cost of the activities per linear meter of the blended polyester
product and 150/1 by multiplying the vector cost rate x the completion time for each activity. For
example, the cost of the design activity per linear meter was calculated by (48.017 x 8.5/100) and so
on for the rest Activities to reach the total cost per linear meter, which amounted to (3627 dinars) for
the mixed polyester product.
Seventh : The planned cost per unit (linear meter)
The cost of one unit is calculated from the direct costs (materials, wages) + the indirect costs
represented in the cost of activities, as the cost of activities per unit for the mixed polyester product
amounted to (3627) dinars, and for the polyester product 150/1 amounted to (3640) dinars, and the
table (2) shows The planned total cost of the polyester blended product:
Table (2) Planned cost per linear meter per activity for Polyester 150/1 and Polyester Mixed for
2019
Activity
Planned
router
cost rate
Planned
completion
time for each
activity
(polyester
1/150)
Planned
completion
time for each
activity
(polyester
blended)
The cost of one
unit (Linear
meter)
Polyester
1/150
Cost per unit
(linear
meter)
polyester
blend
the design
48.017
min/batch 8.5
100
min/batch 8.5
100
4.081
4.081
Purchase
of
resources
35.125
min/order 10.3
50
/
7.236
/
Material
Inspection
39.460
min/order 8
50
/
6.314
/
knitting
217.542
min/batch 28
100
min/batch 28
100
60.912
60.912
sequel
57.539
38
38
2186.482
2186.482
koi
92.207
7.5
7.5
691.553
691.553
Products
Inspection
37.446
18
18
674.028
674.028
Packaging
58.619
min/batch 17.2
100
min/batch 17.2
100
10.08
10.08
Total cost of planned activities per unit
(linear meter)
3640.686
3627.136
direct cost
759
538
The cost of the planned activities
3640
3627
Total planned cost per linear meter
4399
4165
Source: Prepared by the researcher
Table (2) shows the total planned cost of activities per linear meter of polyester product 150/1 by
multiplying the vector cost rate x completion time for each activity. For example, the cost of the activity
of purchasing raw materials per linear meter was calculated by (35.125 x 10.3/100) and so on for the
rest Activities to reach the total cost per linear meter, which amounted to the mixed polyester product
(3640 dinars). From the table it is noted that the planned cost of the mixed polyester product
amounted to (4165) dinars according to the (TD-ABB) method, while according to the traditional cost
method, its cost amounted to (7753). ) dinars, which decreased by (46%), but from table (9) we note
that the planned cost of the polyester product 150/1 amounted to (4,399) dinars according to the (TD-
ABB) method, while according to the traditional cost method, its cost amounted to (7950) dinars, i.e.
It decreased by (45%), and we note that this cost reduction is the result of the ability of the (TD-ABB)
method, to manage the time and events of activities by reducing it, because it depends on practical
energy and not on theoretical energy.
2.3 Application of throughput accounting in a Wasit textile and knitting factory
1.2.3 Metrics of achievement
Achievement is the most important measure in the method of accounting for the throughput
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accounting, where maximizing achievement is the first goal that leads to profitability. For the concept
of achievement, there are three measures, which are as follows:
First, the achievement rate
The completion rate is a measure of the speed of money turnover per unit, or the amount of sales per
unit time, and thus helps management to identify activities that take longer and cost more, and it can
be calculated as follows:
1- Determining the sales (good units) of polyester fabrics for each month for the year 2019, as the sales
quantities for the mixed polyester product for 2019 amounted to (204956 linear meters), and for the
polyester product (1/150) (9957) linear meters
After determining the number of actual working days for each quarter for the year 2019 and the daily
working hours after excluding the time of attendance, leaving and rest time for workers, the actual
manufacturing time for 2019 was calculated by multiplying the number of actual days x the actual daily
working hours.
2- Calculating the annual achievement rate for the year 2019
It is noted that the achievement rate of the polyester blended product, there is a discrepancy in the
completion rates for each quarter of the year, as it reached the highest completion rate in the first
quarter of the year, reaching (218,247) and began to decline for the second, third and fourth quarters,
as the completion rate for the fourth quarter is the lowest, reaching ( 47,024) The reason for the
decrease in the completion rate is due to the decrease in the amount of sales, as it reached the highest
amount of sales in the first quarter, which amounted to (73,331 linear meters). For Polyester Blend
(162.663)
For the polyester product 1/150, the achievement rate for the polyester product is 1/150. There is a
discrepancy in the completion rates for each quarter of the year, as it reached the highest completion
rate in the third quarter of the year, reaching (10.494) and began to decline for the first, second and
fourth quarters, as the completion rate for the quarter The fourth is the lowest rate, as it reached
(3,281). The reason for the decrease in the completion rate is due to the decrease in the amount of
sales, as it reached the highest amount of sales in the third quarter, which amounted to (3463 linear
meters), and it can also be noted that the achievement rate decreased for the polyester product 1/150,
which reached (7,902). On the achievement rate of the mixed polyester product, which amounted to
(162.663), due to the somewhat significant decrease in polyester sales 1/150.
Second: achievement
The of achievement can be applied to the product of mixed polyester and polyester fabrics 1/150 for
a specific period, annual and quarterly, starting first by defining the restrictions of the production
process for the research sample represented by the following:
The first constraint: the increase in the stock of complete production due to the lack of demand for
local products due to the orientation to the imported product in the markets, and because the method
of throughput accountingfocuses on sales, with an inverse relationship between inventory and the
profit achieved, as the higher the level of the inventory, the lower the profits because the increase The
level of inventory in the factory requires additional expenses to maintain the inventory, and the high
level of inventory can be addressed through the use of modern methods of on-time production (JIT),
which in turn helps the factory to reduce inventory expenses.
The second constraint: importing raw materials, as contracting processes to purchase raw materials
take a long time, in addition to the delay in the stage of material inspection, as well as the increase in
prices, which leads to an increase in the cost of local products.
The third restriction: the market restrictions represented in the ways of marketing the factory’s
products as well as providing the same product at low prices and specifications that compete with the
local product as it meets the desires of customers. For example, the product of polyester fabrics has
specifications of one and a half meters, while the imported fabrics in the markets are of a width of 2
meters and at prices that compete with the local product and thus the market is considered The
controller of the product, its pricing, its quality and the quantities required, thus affecting the
completion rate of the factory, and to address these restrictions, activating the marketing centers
located in the governorates in addition to advertising campaigns and promoting products and trying
to approach government agencies by contracting with the factory to dispose of its products
The fourth constraint: the electrical energy, as the factory suffers from continuous interruptions due
to the deterioration of the general situation of electrical energy in the country, which impedes the
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production process and stops it
Fifth constraint: the obsolescence of the machines due to the obsolescence of the factory machines and
their inability to work with the production capacity of the machines, which causes unplanned
malfunctions that stop the production process.
The achievement was calculated for each of the mixed polyester and polyester products 1/115 for the
year 2019 as follows:
Polyester Blend = 169268324 - 80752664 = 88515660
of achievement Polyester 1/150 = 7186915 - 9220182 = -2033267
The of achievement for the mixed polyester and polyester product 1/150 amounted to (88515660)
dinars and (-2033267) dinars, respectively. The of achievement for the product 150/1 was negative
due to the high variable costs represented in the cost of raw materials, due to the increase in their
prices because all raw materials are imported. .
Third: Completion time: Completion time consists of (running time - examination time -
handling time)
1- Operating time: It is the time during which work is carried out on the product, as the Wasit Textile
and Knitting Factory operates with one working meal and at the present time it is covered by official
holidays and occasions, so the actual working days for each month have been determined.
2- Inspection time: It is the time allotted for the product to conform to the specifications (product
quality).
3- Handling time: It is the time required to transfer materials or products under manufacture from one
activity to another
Through field visits to the Wasit Weaving and Knitting Factory, and by reviewing the production
process, it is noted that the total completion time for the mixed polyester product reached (117.2)
minutes, and for the polyester product/1150 reached (135.5) minutes.
Whereas, the completion time for the polyester product was determined 1/150, which is the result of
the total completion times of the activities that contributed to the production process, and based on
the results of applying the budget method based on activities, where the activities that do not add value
to the factory and represented by the handling and storage activities were deleted, where the total
completion time of the polyester product reached The mixture (135.5 minutes).
The percentage of completion time is calculated for each agency product:
Polyester blended = 117/253 x 100 = 46%
Polyester 1/150 = 136/253 x 100 = 54%
It means that the polyester product 1/150 turns into a complete product with a higher percentage of
completion than the mixed polyester.
The value of the production time is calculated for each agency product:
Completion time value of polyester blend = 46% x 204956 x 826 = 778750852
Completion time value of polyester blend = 54% x 9957 x 722 = 3882035
It is noted that the value of the completion time of the mixed polyester fabrics product has increased
due to the high percentage of completion time and the high number of units sold, as well as the high
selling price per linear meter compared to the polyester product 1/150.
2.2.3 Inventory measures: represented by the inventory turnover rate, which works to reduce the
inventory level at each stage of production, as the lower the inventory balance, the greater the number
of inventory turnover times, and the increase in the inventory turnover rate is a positive indicator to
reduce the level of inventory retained
Relying on the data of the Wasit Weaving and Knitting Factory, the cost of the complete production
inventory was determined, as it reached for the mixed polyester product (15337000) and for the
polyester product 150/1 (1740000).
(Sales Revenue) / (Duration Last Finished Production Cost) = Inventory Turnover Rate
(mixed)inventory turnover rate= 169268324/15337000 = 11.04
Inventory turnover rate= 7186915/1740000=(150/1)= 4.13
From the above, the inventory turnover rate for each product, we note that the turnover rate for the
production of mixed polyester fabrics amounted to (11.04), which is higher than the turnover rate for
the polyester product 150/1, which amounted to (4.13), which means that the number of times the
turnover of the mixed polyester product is more than the polyester product 150 1/1, and indicates
that the stock level of the blended polyester product is lower, due to the higher amount of sales and
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sales revenue compared to the polyester product 1/150.
3.2.3 Operating Expense Metrics
It represents all the expenses incurred by the factory to transform the stock into an achievement.
Several measures can be applied to the research sample as follows:
First: The Factory Efficiency Scale: A statement of the relationship between inputs and outputs. The
factory efficiency can be calculated for both products as follows:
polyester blend efficiency rate = (delivery )/(industrial costs)= 88515660/274083800 = 32%
(delivery )/(industrial costs)=150/1 polyester efficiency rate = (-2033267)/155809260 = (1.3%)
From the above, the factory efficiency rate for the products of the knitted fabrics section, where the
efficiency rate for the mixed polyester product reached (32%), which represents a comparison of the
of achievement with the industrial costs contributing to the production, and the polyester product
reached 1/150 (-1.3%), and the percentage appeared negative because the of achievement For the
product (-2033267) because it achieves a loss in the polyester product 150/1 due to the high variable
costs represented only in the cost of raw materials, considering all of them are imported and their high
costs.
Second: Direct Wage Efficiency Measurement: It is the direct wage participation ratio for
transferring inventory to achievement. These are the following:
(achievement )/(wages cost)=mixed wages efficiency rate = 88515660/137484141= 64%
150/1 wage efficiency rate = (delivery )/(wage cost) = (-2033267)/4395315 )= (46%)
After calculating the efficiency rate of direct wages for the products of the knitted fabrics section,
where the wage efficiency rate for the mixed polyester product is (64%) and it is noted that the
percentage is high, which means that the mixed polyester product achieves the relationship between
inputs and outputs using labor, and for the polyester product it reached 150/1 (-46%) And the
percentage appeared negative, because the of achievement of the product (-2033267) because it
achieves a loss in the polyester product 150/1 due to the high variable costs represented only by the
cost of raw materials, considering all of them are imported and their high costs.
Table (3) Standards for throughput accounting for polyester fabric products for the year 2019
the scale
Products
polyester blend
Polyester 150/1
Completion rate
162.663
7.902
of achievement
88515660 dinars
-2033267 dinars
Completion time
117.2 minutes
135.5 minutes
Completion time percentage
46%
54%
Completion time value
778750852 dinars
3882035 dinars
Inventory turnover
11.04 times
4.13 times
Factory Efficiency Rate
32%
-1.3%
Direct wage efficiency rate
64%
-46%
Source: Prepared by the researcher
From the above and after applying the method of throughput accounting in a Wasit textile and knitting
factory, it is noted that the method of throughput accounting considers that the only variable element
in the units sold is the cost of direct materials, while the cost of direct wages and indirect cost are
considered operating expenses, the difference in the unit share Produced from operational costs due
to the difference in completion time, units sold and selling price between products, while all units
produced were charged in equal proportions under the traditional approach and the natural
completion of each product was not taken into account, as well as the multiplicity of restrictions inside
and outside the factory with the diversity of practical procedures that it set Managing the sample for
the purpose of getting rid of the restrictions and moving them outside the limits of the sample, noting
the diversity of external restrictions and trying to develop solutions to some of those restrictions in
light of the possibilities available to them.
Fourth topic: conclusions and recommendations
First: Conclusions:
After applying the activity based budget time driven method (TDABB) as one of the cost management
tools that contributes to reducing costs and also helps in good production planning, the research
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reached a set of conclusions, including: The application of the budgeting method activity based budget
time driven method (TDABB) is based on On time as a basic guide in distributing the cost of resources
to the objectives of cost management, and then the outputs of this method of information are
characterized by their accuracy and more detailed, as the most dependent on this method is time, as
time is one of the basic success factors of the economic unit and depending on the times specified in
Preparing the budget highlights its role in applying the method of throughput accounting by calculating
the completion time for each product. It is noted from Table (10) that the planned cost of the mixed
polyester product amounted to (4165 dinars) and for the polyester product 150/1 it amounted to
(4399 dinars), for the management of Time and cost by defining the times for each activity and deleting
the activities that do not add value as well as applying the method of throughput accounting by
considering the variable costs are only the cost of materials The primary and thus achieving a high of
achievement for the Wasit Textile and Knitting Factory. As for the rest of the cost elements of direct
wages and indirect costs, they are considered operating expenses, and many capital expenditures were
recorded on the account of uses, which led to a significant increase in the total of this account and as a
result of reclassifying the cost elements. For the research sample, it led to achieving a of achievement
of (86482393) dinars, as it achieved a total loss of (-70533938) dinars when applying the traditional
approach to the Wasit weaving and weaving factory.
Second: Recommendations:
The research recommends the application of the activity based budget time driven method (TDABB)
as one of the modern cost management tools for its role in reducing the cost of its products and to
contribute to the application of the method of accounting for the throughput accounting of the knitting
factory - the outer fabric weaving department in the factory. The research also recommends tackling
the high cost of raw materials involved in the production of polyester fabrics 1/150 by cooperating
with suppliers at lower prices, since all of them are imported. The research sample.
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