Total factory cost (throughput accounting)

In the simplified throughput accounting model, total factory cost comprises the factory’s operating costs other than direct materials treated as the totally variable cost. Labour and overheads are normally treated as fixed in the short term. Dividing total factory cost by available bottleneck hours gives factory cost per bottleneck hour, which is compared with throughput return per bottleneck hour. The term has a different scope from a general full production cost that includes direct materials, so identify the framework before calculating.