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Throughput accounting – ACCA Performance Management (PM)

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    • No. We are only concerned with costs in the factory (there could be other fixed costs as well which we are not interested in for these purposes). Also, it is simply that we assume that all costs apart from materials are fixed in the short-term – they will not all be fixed costs in the long-term.

  2. Hi there John , i appreciate your work so much

    I am here to point out an error , i think in the lecture notes for Example 2 answers on Throughput Accounting

    Units produced for Product B are supposed to be 8000 units not 10000 as depicted within the answers to the exercise

  3. can any body please tell me how to solve this question
    A manufacturing co decides which three mutually exclusive products to make in its factory on the basis of maximising the companies throughput Accounting ratio
    current data for the products is shown in the table
    Product X prod y Prod Z
    selling price p u 60 40 20
    direct material cost PU 40 10 60
    Machine HRS pu 10 20 2.5
    total Factory cost ( excluding dir materials are $150000 The company cannot make enough of any product to satisfy the external demand entirely as machine Hrs are restricted
    wht is the objective of this question and how should i solve it

  4. Hello John sir,
    How are you?
    I hope you are great,
    First of all thank you for your explanation and your appreciated time, I have a question its mainly related to throughput CM. And concerned to fixed manufacturing costs under throughput CM all manufacturing costs except direct material all consider as fixed costs and you have explained the reason for being DL as fixed but in case of other variable costs like electricity, water and maintenance for example what is the reason for being as fixed costs under throughput CM.
    Thank you in advance.

  5. Hello John sir,
    How are you?
    I hope you are great,
    First of all thank you for your explanation and your appreciated time, I have a question its mainly related to throughput CM. And concerned to all manufacturing costs except direct material all consider as fixed costs and you have done the reason for being DL as fixed but in case of other variable costs like electricity, water and maintenance for example what is the reason for being as fixed costs under throughput CM.
    Thank you in advance.

  6. Hi John. Could you explain why when calculating profit using optimal production (20k units of A and 8k of B), we use fixed cost multiplied by 20k units of A and 10k units of B (and not 8k units)

    Many thanks!

  7. Hi John,

    I’m sitting my PM exam in March 2020 and your lectures are awesome!

    Quick question, the lecture and notes state the Throughput Accounting Ratio is worked out by dividing by return or cost by the factory hours, just to clarify does this change depending on what the bottle neck resource is?

    Thanks

  11. Good evening sir,

    I have found out that I can draw a conclusion in solving the throughput and key factor analysis.

    Step 1, Contribution/u or Throughput and then contribution/u/h or Return blablabla, so that I can judge which is the better/best option

    Step 2, considering how many units of each product should be produced, and then the total contribution

    Step 3, Work out and eliminate Fixed or “Fixed” costs, then the best profit

    I suggest that your lecture is really helpful, really appreciate it!!!!????

    BTW, Looking forward to the ‘bottleneck section’ since I have to check my answer.

    Have a good weekend, sir
    Lancelot Wang Xue-Ran from China

  12. Hi Sir,
    Thank you for this well made lecture!
    I was able to understand all the details regarding throughput accounting and Key factor Analysis.

    I now only hope that you would also take some of your free time to make a lecture on Bottleneck resource to explain how u would approach the Example question given.

    (A short 3-4 mins video would suffice, in which you run over how to do the example).

    Thank you yet again for your generous work.

    Regards,
    Darin P. Stephen

  13. Hi John,
    I was going through an MCQ question on Throughput Account and came across a question, it was on the Through Put Accounting Ratio.
    I wanted to calculate the total factory cost and came across an admin cost.

    I Added the Labour cost, Fixed cost and the Admin cost and discovered later that the Admin cost is not supposed to be added tot he total factory cost.

    I just wanted to confirm that admin cost should not be added to total factory cost.

  15. Good afternoon,

    On the lecture notes in Chapter 5 there is a point called Bottleneck Resources, i see this was not discussed or mentioned at all in the lectures. how important is this for the exam?

  16. Hi dear john,
    I’v watched your lecture completely and i got all of the topics and cases except the last calculation in your last lecture in throughput accounting
    It says the ratio should be more than 1
    But i couldnt understand its logic
    If it was selling price per u divided by cost per u I could see the logic because selling price covers the costs and its 1 or more than 1 and its ok
    But here is profit on costs and it says it should be more than one to cover the costs
    I assumed that if the profit or return per hour is 0.5 and cost per hour hour is 2
    Answer will be less than 1 but its ok
    Because its profit/return and no selling price…

    I think i misunderstood a part because it doesnt match with your lecture

    I’ll be thankful if you help me in this way:)

  18. Thanks John. If I may ask, what’s the best course of action for products with TPAR <1? What are some of the challenges of using this approach. How can we make decisions in a TPA environment?

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