Costing

This topic has 3 replies, 2 voices, and was last updated 13 years ago by John Moffat.

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May 20, 2013 at 9:31 am #126186
zhela
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Hi

Is traditional contribution analysis another phrase for absorption costing?

Thanks
May 20, 2013 at 2:47 pm #126311
John Moffat
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No – not at all.

Absorption costing is when the fixed overheads are included in the cost per unit.

Contribution analysis is working on the contribution, which is the selling price less the variable costs (or profit before fixed costs – same thing).
May 20, 2013 at 5:21 pm #126347
zhela
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Thank you.

I have a question which im not sure how to answer.

Calculate the mix (units) of products a and b which will maximise net profit and the value of that net profit using throughput accounting contribution analysis?

Does this require you to calculate the return per factory hour and the cost per factory hour?

Thanks
May 21, 2013 at 6:13 am #126405
John Moffat
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You do need the return per factory hour – this will tell you which is the ‘best’ product to produce in full (the other product will be limited by the time available). You do not need the cost per factory hour.
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