• Avatar of John Moffat says

      You don’t apply it (and so I can’t use the example!). It is implicit in throughput accounting.

      The point is that we assume that materials is a variable cost and that week by week we pay more or less for materials depending on whether we produce more or less.

      However, if we were prepared to keep inventory then we could maybe order a constant quantity each week so that if demand is low then we carry forward inventory and use it in weeks when demand is high.

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