Performance Management · Throughput accounting

Theory of Constraints and Bottleneck Resources in ACCA PM

Updated 11 October 2026 · Fact-checked

The Theory of Constraints says a system's output is limited by its bottleneck resource, the one with the least spare capacity compared with demand. You find it by comparing the time needed for demand with the time available, then apply five steps: identify, exploit, subordinate, elevate, repeat.

Understand Theory of Constraints and Bottleneck Resources

Every production process has at least one resource that limits how much the business can make and sell. This is the bottleneck resource (also called the constraint). It might be a machine, a skilled labour grade, a material or even a market limit.

The Theory of Constraints (TOC) is the idea that the output of the whole system can only rise if you improve the bottleneck. Speeding up a non-bottleneck resource does not increase sales. It only builds up unwanted stock in front of the bottleneck.

TOC links to throughput accounting. Throughput is sales revenue less totally variable costs, usually material costs. The aim is to maximise throughput per unit of bottleneck resource, while keeping stock and operating expenses under control.

TOC uses five focusing steps. First, identify the bottleneck. Second, exploit it, so it is never idle and only produces what is needed. Third, subordinate everything else to it, so other resources work at the bottleneck's pace. Fourth, elevate the bottleneck by adding capacity, for example more machines, overtime or outsourcing. Fifth, repeat, because once one constraint is removed another will appear.

The link with limiting factor analysis is close. Limiting factor analysis ranks products by contribution per scarce unit. TOC ranks products by throughput per bottleneck hour and then goes further, by asking how to ease the constraint. Both give the same ranking if labour is a fixed cost and materials are the only variable cost.

Key rules to remember

Throughput: Throughput = Sales revenue − Totally variable costs (usually direct materials); Labour is treated as a fixed operating cost in throughput accounting unless the question says otherwise.
Throughput per unit of bottleneck resource: Throughput per bottleneck hour = Throughput per unit ÷ Bottleneck hours per unit; Rank products highest to lowest. Produce in this order until demand or capacity runs out.
Identifying the bottleneck: Hours needed for maximum demand ÷ Hours available; The resource with the highest ratio, above 1, is the bottleneck. It has the shortest supply relative to demand.
Factory cost per bottleneck hour: Total factory cost per hour = Total factory costs ÷ Bottleneck hours available; Used in the throughput accounting ratio (TPAR), covered in a related topic.
Five focusing steps: Identify → Exploit → Subordinate → Elevate → Repeat; Learn the order and be able to explain each step in context.

How to solve Theory of Constraints and Bottleneck Resources questions

Use this method for any question on bottlenecks or the Theory of Constraints.

1List the resources (machines, labour grades, materials) and the time or units each product needs from each.
2Calculate the total requirement of each resource for maximum demand.
3Compare requirement with availability. The resource with a shortfall (or the biggest shortfall in proportion) is the bottleneck.
4Calculate throughput per unit for each product: selling price less material and other totally variable costs.
5Divide by bottleneck hours per unit and rank the products.
6Allocate bottleneck hours in rank order, limited by demand, to find the production plan and total throughput.
7Deduct operating expenses (factory costs) if asked for profit.
8If the question asks for discussion, link each of the five steps to the scenario, naming the actual resources.

Quickest way: Bottleneck ratio and rank in one pass

When to use it: Use in Section A or B objective questions where you must name the bottleneck or choose the best product mix quickly.

Write one line per resource: demand hours ÷ available hours.
Circle the largest ratio above 1. That is the bottleneck.
For each product, compute selling price minus materials, then divide by bottleneck hours.
Rank and fill capacity from the top, stopping at demand limits.
Check that you have used all bottleneck hours and no product exceeds demand.

Common mistakes in Theory of Constraints and Bottleneck Resources

Treating the machine with the most total hours as the bottleneck, ignoring availability.
Students look only at hours used, not at hours available.
Fix: Always compare needed hours with available hours for each resource. The bottleneck is the shortfall.
Deducting labour cost when calculating throughput.
Habit from contribution calculations, where labour is a variable cost.
Fix: In throughput accounting, labour is normally a fixed cost. Deduct only materials, or whatever the question calls totally variable.
Ranking products by throughput per unit instead of per bottleneck hour.
The highest throughput per unit looks most attractive.
Fix: Always divide by the bottleneck time per unit before ranking.
Listing the five steps without applying them to the scenario.
Students memorise the list and stop there.
Fix: Name the actual bottleneck, say what you would do to it, and give a practical example for each step.
Forgetting that the bottleneck can move after it is elevated.
Students treat the problem as solved after one improvement.
Fix: State that step five repeats the process, because another resource or the market becomes the new constraint.

Worked examples

Example 1

Company R makes two products. Maximum demand is 400 units of X and 300 units of Y per month. Selling price and material cost per unit: X ₹900 and ₹300; Y ₹1,000 and ₹200. Machine time per unit: X 2 hours, Y 3 hours. Assembly time per unit: X 1 hour, Y 1 hour. Machine hours available are 1,200 and assembly hours available are 800. Which resource is the bottleneck?

Show the solution

Machine hours needed: 400 × 2 + 300 × 3 = 800 + 900 = 1,700 hours.
Machine ratio: 1,700 ÷ 1,200 = 1.42.
Assembly hours needed: 400 × 1 + 300 × 1 = 700 hours.
Assembly ratio: 700 ÷ 800 = 0.875, so there is spare capacity.
Only machine time is short of what demand requires.

Answer: Machine time is the bottleneck (needs 1,700 hours, only 1,200 available).

Example 2

Using the data in the previous example, find the production plan that maximises throughput and the total throughput per month.

Show the solution

Throughput per unit: X = ₹900 − ₹300 = ₹600. Y = ₹1,000 − ₹200 = ₹800.
Throughput per machine hour: X = ₹600 ÷ 2 = ₹300. Y = ₹800 ÷ 3 = ₹266.67.
Rank: X first, Y second.
Make 400 units of X using 800 machine hours. Throughput = 400 × ₹600 = ₹2,40,000.
Remaining machine hours: 1,200 − 800 = 400. Units of Y = 400 ÷ 3 = 133.33.
Throughput from Y = 400 × ₹266.67 = ₹1,06,667 (approximately).
Total throughput = ₹2,40,000 + ₹1,06,667 = ₹3,46,667.

Answer: Make 400 units of X and about 133 units of Y. Total throughput is about ₹3,46,667 per month.

Exam tips

In objective questions, find the bottleneck first. Every later calculation depends on it.
Read how the question defines throughput. Some questions treat only materials as variable. Follow their definition.
In written parts, use the five steps as a framework but anchor each one to the scenario's own resources.
When asked to compare TOC with limiting factor analysis, mention the focus on elevating the constraint and on stock and operating expenses, not just ranking.
Show the bottleneck ratio or hours check clearly. Marks in Section C are given for method.

Practice questions from Throughput accounting

Theory of Constraints and Bottleneck Resources in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FinalTheory of Constraints and Bottlenecks

Theory of Constraints and Bottleneck Resources: frequently asked questions

What are the five focusing steps of the Theory of Constraints?

They are identify the constraint, exploit it, subordinate everything else to it, elevate it, and repeat the process. Exploiting means getting the most from the constraint as it is. Elevating means investing to increase its capacity.

How do I identify the bottleneck resource in an ACCA PM question?

Work out the hours each resource needs for maximum demand and compare them with hours available. The resource with the shortfall, or the highest ratio of needed to available hours, is the bottleneck.

What is the difference between the Theory of Constraints and limiting factor analysis?

Both rank products by return per unit of the scarce resource. TOC uses throughput, which deducts only totally variable costs, and adds a process for managing and improving the constraint. Limiting factor analysis usually uses contribution and stops at the production plan.

Can there be more than one bottleneck?

In ACCA PM questions there is normally one. In practice, after you relieve one constraint another resource becomes the limit, which is why the process repeats.