In Exhibit 2’s bolt-hole process, a bolt-hole machine drills holes into the steel blades that are to be TCed. Some blades have more and some have fewer bolt holes, depending on the design specifications. (a) Would the use of activity-based costing (ABC) to allocate bolt-hole- processing cost versus Barbco’s use of time on the TCing machine lead to different product costs? (b) In what ways might the use of each of these allocation systems be beneficial or ineffective—in general, and at Barbco? Explain fully

Q1. Barbco’s organizational design borrows from both lean management and the Theory of Constraints. Describe the
unique characteristics of Barbco’s design and accounting system with respect to lean management and TOC. In
particular, discuss differences in approaching continuous improvement, cell design, value- versus cost- based
decisions, and accounting methods.
Q2. In Exhibit 2’s bolt-hole process, a bolt-hole machine drills holes into the steel blades that are to be TCed.
Some blades have more and some have fewer bolt holes, depending on the design specifications. (a) Would the
use of activity-based costing (ABC) to allocate bolt-hole- processing cost versus Barbco’s use of time on the
TCing machine lead to different product costs? (b) In what ways might the use of each of these allocation
systems be beneficial or ineffective—in general, and at Barbco? Explain fully

Q3. How do Barbco’s manufacturing and reporting systems support its key success factors (key strategic components)
of product quality, on-time delivery, and cost?
Q4. How would cost-plus pricing change continuous improvement at Barbco? Compare and explain fully the
strategic and operational implications of cost-plus pricing versus Barbco’s existing pricing approach.
Q5. Compare how the strategy for lean manufacturing and Barbco’s system lead to different production and
information systems. Include in your discussion the strategy underlying each approach, the information/
accounting systems used to support the strategy, and decision effects.
Q6. How are Barbco’s performance charts specifically designed to support Barbco’s strategy and continuous
improvement management process?

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