• Profile photo 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.

  1. Profile photo of Temperance says


    Hi sir this is quite excellent. I am also using the Bpp text and will appreciate your assistance in working a question.

    Question.- Example pg 54

    Growler manufactures computer components . Health and safety regulations mean that one of its processes can only be operated 8 hours a day. The hourly capacity of this process is 500 units per hour.The selling price of each components is $100 and the unit material cost is $40. The daily total of all factory costs is $144, 000 excluding materials. Expected production is 3600 units per day.


    Calculate the return per factory hour (RPFH)

    This is what i was not able to understand. In the working, the RPFH= $30,000.What i do not understand is why 500 was used and not the 8hrs. What is did was 100-40/8=7.5 which is wrong:(

    Thanking You


    • Profile photo of John Moffat says

      A production line is likely to have several processes involved. (For example, the production of cars might involve one process where the shape is made, another process where the windows are put in, another process where they are painted. etc. etc.)

      The bottleneck process is the one that is the slowest and therefore slows down the whole production. (For example, they may be able to put the windows in on 1000 cars an hours, but if they are only able to paint 600 cars an hour then it will slow down the windows department (there is no point in them doing 1000 an hour because they would all build up while waiting for the painting department to deal with them – of these two, painting would be the bottleneck process.)

      For this reason, we apply throughput accounting just to the bottleneck process.

      • avatar says

        Thank you so much sir, only few days left for the exam and still take long time understand the question and also do stupid mistakes. :(

    • Profile photo of John Moffat says

      From the notes alone – no.
      But from the notes and lectures together, then yes!

      However, it is important to make sure you understand – if you really understand then it is not so much a question of learning for the written parts.

      (And make sure that you practice lots of questions – preferably using an Exam/Revision Kit from one of the approved publishers)

      PS If you expect a reply from a tutor then ask in the Ask the ACCA Tutor Forum. Here is just for comments on the lectures.

  2. avatar says

    Brilliant lecture sir! :) I have a question though, after finishing the lecture on this chapter I’m about to read the student article on it. I found this one from opentuition:

    and this one from ACCA website:

    Should I read the opentuition or or the one from acca website?

    Thank you sir :)

    • Profile photo of John Moffat says

      Read all of them (the OpenTuition one also appeared in Student Accountant – however, it was a while ago so ignore the bit on Backflush accounting because that has been removed from the syllabus).

      However, do not spend too much time on them – Throughput accounting was asked in December and so although it could be asked again in June it is rather unlikely.

  3. avatar says

    the lecture was great and well understood,but what if in the event you have more than 1 bottle neck?do we just solve as same with the example above applying same method to the other bottle necks?


    • Profile photo of John Moffat says

      The only way that you could have more than one bottleneck would be if two or more processes had exactly the same limits.
      This will not happen in the exam (and is unlikely in practice). However the solution would be to ‘amalgamate’ the processes and do the arithmetic as though it was one process.

  4. Profile photo of pfirsch2012 says

    Dear Sir, thank you very much for the great lecture!
    I still have a question about the throughput accounting ratio (TPAR) though. In the exam when we are asked to calculate the TPAR in a multi-product scenario, should we calculate the TPAR for each product individually or for all the products as a whole? What I mean by ‘as a whole’ is to get only one TPAR by using the total throughput at the optimum production plan.
    Looking forward to your answer! Cheers!

    • avatar says

      I’ll second that – fantastic lecture! I’ve been struggling with the Kaplan material. Watching the lecture I found that I was understanding the whole process and could follow each step and it’s now all making sense. I’m a lot more confident now if this comes up in the exam. A big thank you!

  5. avatar says

    Good lecture. It seems a little strange to me that you calculate your fixed cost based on your original budgeted hours in throughput accounting considering they won’t be your fixed costs as you won’t be working to maximum capacity but if that’s they way to do then that’s they way I’ll do it.

      • avatar says

        True but then why have a fixed cost per unit (as shown in example 2 page 17 as this would change depending on the number of units produced. The fixed cost should just be given as an amount really no? I understand by definition it shouldn’t change just seems a contradictory that it is fixed per unit and not fixed up to a certain production volume.

      • Profile photo of John Moffat says

        The cost card has been prepared using absorption costing (because fixed costs are there – they have been absorbed into the unit cost).

        However this is not assuming that the actual fixed cost per unit stays the same. The cost card is prepared using budget figures i.e. budget total fixed costs and budget production (in order to, for example, help decide on what selling price to charge).

        However, in both conventional contribution analysis (example 1) and throughput accounting (example 2) we assume that the total fixed costs will stay the same. That is why we have calculated the total budgeted fixed costs (using budget production and budget cost per unit) and then assumed that that total remains fixed,

        (Absorption costing and marginal costing are not examined specifically in F5 because they were in F2, but the ideas are relevant in, for example, the examples in this chapter. If you want more on absorption and marginal (and the reasons in practice for choosing one method or the other) have a look at the lectures for F2)

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