Throughput accounting – Key Factor Analysis – ACCA Performance Management (PM)
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Sir, in case the question doesn’t provide the fixed costs, we assume that the costings were done before having the knowledge about the limited resource. Do we also assume that volume was the basis for absorption? Couldn’t we have absorbed it on the basis of machine hours?
We assume that the absorption was done on the budgeted figures before knowledge of the limit on the resource, as I explain in the lectures.
If you are required to absorb the overheads (which is not the case in this example) then the question will tell you the basis to use.
hello sir i am appreciating ur effort as always..
the thing that i cant understand is why we dont use absorption costing in this lesson? why we used the fixed cost per unit here?
Just as in Paper MA, it is marginal costing that is relevant for decision making because total fixed costs are not affected by the level of production by definition.
Hi John!
Thank you for the lecture.
To decide which product the company should produce full demand I calculated the Throughput per hour. Can I use this method interchangeable with the contribution or is there specific context for each one?
Thank you for your time!
Claudia B
They are not interchangeable. Exam questions will make it clear if they require you to use throughput accounting.
Thank you John!
You are welcome 馃檪
Hi,
sir john hope you are doing great! i really appreciate the way you teach us but sir there is a humble request to solve more variety of questions in the topics so we can have an extra edge over the topic thank you.
Sir Please assuming for a example if you were told in the question that the company has a policy to produce at least 20,000 units of A, will the company ignore their policy?
It depends what the question is asking. Normally a company will not ignore its own policy!
Well Noted Sir Thanks.
Dear John,
I am not able to sort out the difference between throughput accounting and key factor analysis.
Key factor analysis is to maximise the contribution. Throughput accounting assumes that in the short term the only variable cost is materials and that all other costs are fixed.
Have you watched the second lecture on this chapter?
In exam questions it is always ket factor analysis unless the question specifies to use throughput accounting.
what text do you get the questions from.
i find it hard to follow the calculations when i don’t have access to the question that is being solved
Hello sir, thank you for your effort and your appreciated time
Thank you for your comment 馃檪
Sir is key factor analysis another name for limiting factor analysis?
If it is, how are we suppose to do calculations when there are two limiting factors?
For an eg: both material and machine hours are limiting factors
Yes – key factor analysis is another name for limiting factor analysis.
If there are two limiting factors then we use a technique known as linear programming – this is covered in a later chapter.
Thankyou sir
Thank you sir. These lectures are amazing.
Thank you for your. comment 馃檪
Hello, thank you very much for the lectures!!! I have a question with regards to the contribution per unit when using Throughput accounting. Isn’t it calculated as Sales – Direct Material cost and not all variable costs? Thank you!
Apologies, just realized that indeed this was an example of generic contribution and not for TRPA 馃檪 Ignore my question!
No problem 馃檪
Sir,
If we calculate maximum profit by product. Is it same amount 60,000 for A and 20,000 for B?
If so, there is loss result for Product A.
Thanks.
May
Sorry, but I have no idea what you are asking. The maximum demands are 20,000 and 10,000 units and so I don’t know where you are getting your figures from.
why is the fixed cost assumed to be calculated on the actual demand?
It isn’t!!
It is calculated on the budgeted production, because by definition the total fixed cost will not change just because the actual production is different from the budgeted production.
johnak30: Yes, what you have done is a mistake.
As I make very clear in my free lecture, the total fixed overheads do not (by definition) change with the level of production and they are therefore the budgeted fixed overheads as calculated using the budgeted production.
When calculating the max. profit, I would calculate fixed costs using the quantities of optimum production: A 19.000 u x 3 $/u and B 10.000 u x 2 $/u
Is it a mistake?
Thank you in advance for your answer!
I could not find the video of bottleneck but it is on the notes. Is it possible to get the video of bottleneck?
There is no video at the moment. However what is written in the notes, together with the example (and printed answer) should be sufficient.
Well Explained! Thank you.
Explained very well indeed
how long does it take for F5 self study
It is impossible to say – it depends on how much time you have available (whether you are working full time, for example) and how easy or difficult you find the topics. Most people manage to study for the paper within 2 or 3 months.
(In future please ask this sort of question in the Ask the Tutor Forum, and not as a comment on a lecture.)
Thanks a lot for the wonderful explanation.
Thank you for your comment 馃檪
Thank you John.
You are welcome 馃檪