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Floro Plc exercise (Throughput accounting) Kaplan Kit

Forums › ACCA Forums › ACCA PM Performance Management Forums › Floro Plc exercise (Throughput accounting) Kaplan Kit

  • This topic has 2 replies, 3 voices, and was last updated 8 years ago by John Moffat.
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  • Author
    Posts
  • November 10, 2012 at 4:55 pm #55166
    alua
    Participant
    • Topics: 28
    • Replies: 37
    • ☆☆

    In section b) (i), calculating the maximum net profit, I don’t understand why the answer takes the variable production overhead cost of £28 for A and £4 multiplied by the initial 120000 and 45000 units and NOT the 144000 and 13000 for A and B respectively as the calculation for the optimal mix.
    It has come across similar doubt in other exercise so something I am doing wrong.
    Shouldn’t be variable production overheads adjusted to production volume???

    Many Thanks
    Alua

    May 28, 2017 at 2:19 pm #388600
    hamza
    Member
    • Topics: 0
    • Replies: 1
    • ☆

    Throughput suggest only direct material cost is variable in nature and all other cost i.e (direct labour ,variable overheads and other fixed overheads) are consider fixed costs
    throughput/unit = S.P – direct material/unit
    thats why the answer takes 144,000 units x $28 for product A and 15,000 units x $4 for direct material calculations because its variable i-e they are changing with the level of activity as throughput implies.
    All other costs are fixed therefore 120,000units for product A and 45,000units for product B are being used because they do not change with the level of activity.

    May 28, 2017 at 6:10 pm #388638
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54675
    • ☆☆☆☆☆

    Hamza is very correct, but please do watch the free lectures on this.

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