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Throughput accounting

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  1. 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.

  3. 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

    • 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.

  6. Hello

    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
    Charlotte

    • 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.

      • 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
        Charlotte

  14. 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. 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!

  20. 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.

    thanks

    • Well…that would give the wrong total profit 馃檪

      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..

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