Bottleneck

Definition

A bottleneck is a point of congestion in a production process where the workload exceeds the production capacity, causing delays and inefficiencies. It limits the overall output and affects decision-making regarding resource allocation.

5 Must Know Facts For Your Next Test

1. Bottlenecks can occur at any stage of production, from raw materials to finished goods.
2. Identifying and addressing bottlenecks is crucial for optimizing production efficiency and profitability.
3. In managerial accounting, bottlenecks are often analyzed using techniques like throughput accounting.
4. Resource constraints often lead to bottlenecks, necessitating careful planning and prioritization of tasks.
5. Effective management of bottlenecks can lead to reduced costs and improved product delivery times.

Review Questions

• What is a bottleneck and how does it impact production processes?
• Why is it important to identify bottlenecks when resources are constrained?
• Which accounting technique is commonly used to analyze the financial impact of bottlenecks?

Related terms

Throughput Accounting: An accounting approach that focuses on maximizing the throughput (rate of generating money) by managing constraints.

Constraint: A limitation or restriction in a system that hinders performance or output.

Capacity Utilization: The extent to which an enterprise uses its installed productive capacity.