An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Chia Ling Lee
National Chung - Cheng University

Chin Shi Ou
National Chung - Cheng University

Anne Wu
National Chengchi University

Abstract: This paper examines the interaction effects of capacity utilization and manufacturing quality on bottleneck and costs in a continuous production environment. We collect daily data from a leading steel corporation in Taiwan. The results indicate that an increase in manufacturing quality can weaken the side effect of capacity utilization on bottleneck, furnace costs and abnormal furnace costs. Furthermore, the significant interaction effects of capacity utilizations and manufacturing quality on bottleneck and costs per ton in each furnace depend on casting type, e.g. on continuous casting. Each furnace whose average rework time is 700 minutes increases abnormal furnace costs by an average of NT$228,567.5 due to rework activity. This finding suggests that manufacturing quality improvement should be emphasized to reduce the side effect of bottleneck and utilization on furnace costs, especially in the environment of continuous production and high capacity utilization.

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