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The third article on Section A of the F5 syllabus looks at throughput accounting and
back-flush accounting. Both have been developed in response to relatively modern
advances in manufacturing:
1. The increased reliance of manufacturing businesses on sophisticated and
expensive facilities and machinery. This greatly increases the proportion of costs
which are fixed. (This was one reason why activity based costing has become
more important: if fixed costs are more significant they should be dealt with more
accurately.)
2. A recognition that holding inventory is likely to be a waste of resource.
3. The increased use of just-in-time manufacturing, so that inventory, particularly
work-in-progress, is much reduced and its valuation is therefore less important.
Throughput accounting
Throughput accounting has a very direct relationship with decision-making and
performance management. It begins by focusing on what an organisation’s purpose is –
its goal – and seeks to help organisations attain their purpose by increasing their ‘goal
units’. The approach can be applied in both profit-seeking and not-for-profit
organisations, provided meaningful goal units can be identified.
For example, take a not-for profit organisation which performs a medical screening
service in three sequential stages:
1. Take an X-ray.
2. Interpret the result.
3. Recall patients who need further investigation/tell others that all is fine.
The ‘goal unit’ of this organisation will be to progress a person through all three stages.
The number of people who complete all the stages is the organisation’s throughput, and
the organisation should seek to maximise its throughput. However, there will always be a
limit to throughput, and the resource which sets that limit is called the ‘bottleneck
resource’.
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jtmoneyf6 says
Thanks OT thoroughly delivered . Are the current lecture notes relevant to June 2016 Exam?obviously with revision kit. Thank you.
John Moffat says
Yes they are – our lecture notes are reviewed after every exam and every syllabus change, and amended where necessary.
(Incidentally, the article above is on throughput and backflush. Backflush was removed from the syllabus some time ago, although throughput accounting is still examinable.)
bibilite01 says
Sorry John, I have seen the lectures on throughput. Must have been looking in a different place. Need a coffee break, i guess!
bibilite01 says
Thank you, John and open tuition staff for this great service.
Looking at the study guide for june 2015, throughput and theory of constraint are covered, are there any study resources on these?
mac hagan says
want to download f5 notes,but appears to be hidden how do I go about it
John Moffat says
Hidden?
Go to the ACCA tab at the top of this page, and then choose the F5 tab.
(This article is not part of our Course Notes – it was in the Student Accountant (and the author has given us permission to publish it here.))
John Moffat says
Do note that backflush accounting is no longer in the syllabus – it was removed several years ago.
milosla says
Thanks for the update.Its most appreciated.
milosla says
Very thorough and easy to follow. Pray this comes up in the exam. Thanks Opentuition.