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floro-plc-exercise-throughput-accounting-kaplan-kit
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
AluaIt is because when we use throughput accounting we assume that all costs are fixed (except for materials), so variable overheads will not change with production volume.
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