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Dear Sir,
I would be grateful if you could explain to me the reasoning behind the answer for question 149 in the BPP -ACCA – Performance Management – P&R Kit 2020, in particular the reason for including & not including direct labour and variable overhead costs.
Kindest regards,
Jason
By definition, the throughput contribution is the selling price less the materials cost.
All other costs (such as labour and overheads) are assumed to be fixed in the short term, as I explain in my free lectures on throughput accounting.
(There is an error in the BPP answer to this question – it shows both ‘yes’ and ‘no’ against direct labour, but the answer should only be ‘no’ )
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