1. avatar says

    Very well explained. I was a bit confused about Throughput accounting from my paid lectures at LSBF, but your to the point examples and explanations were amazing.
    Thank you very much

  2. avatar says

    Hello John,

    In example 1 on pg 15, why don’t we calculate the maximum profit by multiplying $2 which is the profit per unit with the 19,000 units of A and then with the 10,000 units of B and add them to get a maximum profit of $ 58,000?Why make the assumption about the fixed cost when the profit per unit is given in the question?

  3. avatar says

    Wow opentuition is the best thing that ever happened to me,jst reading other people’s questions and the answers from the tutor r so relevant to ma own difficult areas, I going 2 kill these f5 thank u all.

  4. Profile photo of Thanana says

    Oh and by that I mean thank you, for the lectures, you just hit straight on the essential things to get one to pass the exam, yes with better chances of course with sufficient practice.

  5. Profile photo of drice99 says

    Hi, John brilliant lecture style thank you very much!
    Can I ask a question, page 16 of the notes, it says
    “In a just in time environment we should be attempting to eliminate inventories. Use of a limited resource in production of inventories should be avoided and therefore any work in progress should be valued at only the material cost”

    Does this mean that there will be no WIP element of a throughput accounting question?
    Either way, does this statement mean that throughput accounting only takes into account what resources are available after production of inventory or does it assume that a company does not produce its own inventory at all?..I guess I don’t fully understand the statement!


    • Profile photo of John Moffat says

      WIP calculations are certainly not relevant for F5 :-)

      The reason that throughput assumes that no inventories are held is that it is assumed that materials are the only true variable cost – i.e. that week by week we buy exactly the material that is needed week by week. If we were keeping inventories then this would not necessarily be the case – we could buy the same materials each week and have inventory left at the end of weeks with low sales, and then use it in weeks when we had high sales. It would make purchases more of a fixed cost in the short them, whereas the essence of throughput accounting is that we regard it as the only real variable cost.

    • 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.

  6. avatarTemperance 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.

  7. 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.

  8. 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.

  9. 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!

  10. 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)

  11. avatar says

    Good day Mr John. Thanks for your insightful lectures. However, I noticed in the second example when deducting the fixed costs for both companies, you included ‘other variable costs’ in the equations as well. I wonder why this is so. Thanks for your help always.

  12. avatar says

    Dear Sir,
    I often seek your help with regards to the comments replies. I have a complex problem that you are only the one to solve:
    I am doing part-time business( my father is not financially supporting me, so I am in pressure of work and money), However the main problem is that I just could not practice any thing for f4, f5. I take your lectures but all seem to wash off from my mind, due to not prating question, because of very scarce time that I get.

    Kindly provide me tips for daily studies and how to study part-time. Kindly also let me know the enough daily practice, I mean how many questions should I do from KIT? My standard plan was to take lectures, study text book and then practice questions. All I am now stuck is at the process of receiving lectures till the maximum text, I cant go ahead of this process due to short time.

    Please solve my problem.

    Many Thanks

    • Profile photo of John Moffat says

      It is difficult to add to what I replied to you before. Remember that most of the people taking the exams are working fulltime and have to study in the evenings and weekends – at least you have more time because you are working part time.

      What you should do is listen to the lectures (and have the course notes in front of you at the same time).
      When you feel confident in the topics then you should practice questions from the revision kit.

      If there are topics where you feel that you do not really understand, then you should look at the study text – use it as a reference book rather than trying to learn everything in it.

  13. avatar says


    Great Lecture!

    I was just wondering if you could clarify something for me? I understand that the main concept of throughput accounting is that, in the short run, all costs in the factory are likely to be fixed with the exception of material costs. However, after watching your lecture and working through example 2 I don’t understand why the figure for ‘other variable costs’ was not deducted along with the cost of materials as it states other ‘variable’ costs. Please can you answer this question for me, so I can get my head around it?

    Thank you

    • Profile photo of John Moffat says

      Normally, we regard materials, direct labour, and variable overheads all as being variable costs.

      With throughput accounting, we assume that (in the short-term) the only variable cost is materials and that all others are fixed. So……labour and variable overheads (i.e. other variable costs) are assumed to be fixed.

      • avatar says

        Ok. Thank you for getting back to me so quickly.

        Ill just make a note that the only variable cost short term is materials!

        Thank you

  14. Profile photo of rohanbp says

    Fantastic lecture. Very clear and logical approach. I’ve understood this 100% and only needed to watch a single lecture once. John Moffat, I honestly think you are the best lecturer I’ve witnessed!

    Thanks to all the people who have made OpenTuition possible!

  15. avatar says

    Thank you very much! I had missed the lectures of throughput accounting in college, n as a revision tests schedule was being planned, i realized that i need to get hold of dis topic as quick as i can! i must say that i had not expected a lecture like this! this is awesome! the best place for revisions, any thing that i have missed, and it certainly is the best guide for students who are studying on self study basis! once again: Thank u for the this great free lecture, m delighted! i will certainly be coming back to this site for sure! i do not know you sir, but i hope that u continue this great work!

  16. avatar says

    Really helpful lecture but I have got a doubt about the example #1.
    Is it not easier to calculate the max profit using the conventional key analysis as 19000( units of A produced ) * $2 ( profit per unit) + 10000 ( units of B produced ) * $2 = $ 38000 + $ 20000 = $ 58000 ?
    What I don’t understand is why we need to make that assumption if we got the profit per unit.


    • Profile photo of John Moffat says

      Well…that would give the wrong total profit :-)

      The reason is that regardless of how we choose to absorb the fixed overheads, the total fixed overheads are (by definition) fixed, in that the total will not change with the level of production.

      Because we are looking at having to change the production quantities we must work on contribution. Once we have the total contribution we can then subtract the total fixed overheads to get the profit..

  17. avatar says

    Could you kindly lecture on Environmental Accounting and Life cycle costing please?
    Even just the small lecture will do, but it will make easier to understand the topic.

    Many thanks..Great job!!

    • Profile photo of John Moffat says

      I will record a lecture on life-cycle costing when I have the time.

      However there will not be a lecture on environmental accounting for the reasons stated on the index page to the lectures (it would only effectively be reading out the course notes since there can not be any calculations asked!).

    • avatar says

      @trini83, Good luck!

      Certain things come up more frequently than others. Out of all the past papers I have done there are certain chapters I would focus on at this late stage.

      Chapter 1 (Activity Based Costing) – 74 minutes for the three lectures.
      Chapter 8 (CVP) – 69 minutes.
      Chapter 13 (Standard costing and basic variance) – 103 minutes.
      Chapter 14 (More variances) – 121 minutes.
      Chapter 15 (Financial performance measurement) – 49 minutes.
      Chapter 16 (Non financial performance measures) – 26 minutes.

      That should be the best bunch of lectures to watch, download and print the notes and follow through the examples. You can skip what you are already confident with!

      After that, though I doubt you’ll have time… Chapters 11 and 7 are good all-round chapters for provoking your thought processes in terms of exams.

      You can fast-forward through bits of the lectures too. Make sure to take breaks after every chapter, and get a good sleep!

      Good luck again!

  18. avatar says

    Excellent Lecture!!!

    I went through the whole book but just realised I didn’t see all of your lectures. I have just now started finally feeling confident thanks to your great help.

    thank you again!

  19. avatar says

    Hi there,

    I’ve recently started going on here and watching the lectures and I’ve found them very helpful. Thans a million for that.

    I would like to knnow though are these lectures enough to get fully prepared for f5 exam or do I have to read the study book as well? I’ve started studying syllabus few days ago and I’m a bit concerned that I won’t have enough time to get ready for the December’s session, since I wanna do f4, f5 and f6…

    Thanks :)


    • Profile photo of armaghansabri99 says

      @atanaska, hi there
      even im attempting F5 this time around. it is said that f5 course is pretty lengthy but trust me its not. the calculations are piece of cake and it’ll take u no time to get a hold of them. secondly, the theory part is a bit tricky but in time you’ll perfect it.
      3 months are more than enough for f4 ,5 & 6.

    • Profile photo of Et says

      @henahailu2, Hi there Hailu sounds familiar .Are you from Et? If you are you know what Et stands for. If you are not sorry for the confusion I may have caused.

      OT is really helpful .They make the course sound intresting.

      Good Luck on your Exams!

      • Profile photo of Et says

        @marlise123, I can understand your frustration. I use Mozilla Firefox and it is working. Try it with Mozilla or Google Chrome. As I am typing this the video is still running . It was a bit slow earlier when I was trying to open The costing chapter 13. I gave it a few mnts and tried it again and it worked.

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