Profit Maximization with Throughput

Profit Maximization with Throughput

1.    Increasing Throughput

Profit can be maximized by increasing throughput, because all other cost are fixed, therefore increase in throughput would have direct impact on profit. In this regard key constraint should be identified & removed.

2.    Reducing Operating Expenses

Profit can also be improved by reducing the operating expenditures. Each and every item is falls under the operating expenditure other than direct material. These items could be analyzed in depth for control purposes.

3.    Reducing Investment

Inventory is treated as investment and there is lot of cost associated with investment. Capital tied up cost, storage cost etc. This investment should be reduced for profit maximization.