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Applying strategic cost analysis concepts to capacity decisions: strategic cost analysis helps companies identify, analyze, and use strategically important resources for continuing success and growth of the business.

EXECUTIVE SUMMARY The product with the highest unit profit may not be the product with the highest profit per unit of resource consumed. The Theory of Constraints (TOC), with its emphasis on throughput costing, offers one possible approach to profitability analysis, but it is focused on the short term. The authors discuss why throughput costing, in combination with ABC, is a better option to guide long-term, strategic decision making.

In the fall of 2005, Ford Motor Company announced a nearly 50% reduction in the number of suppliers it would use in the future. Soon after, Delphi Corp., the largest U.S. automotive parts manufacturer, announced its move into Chapter 11 ...

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