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Kaplan Exam Kit page 13 question 32

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Kaplan Exam Kit page 13 question 32

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.
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  • February 16, 2018 at 11:07 am #437576
    chrisi04
    Member
    • Topics: 49
    • Replies: 23
    • ☆☆

    Throughput accounting views stock building as a non-value adding activity, and therefore discourages it.

    I cannot understand why it is true.

    Kindly, explain why the above statement is true.

    February 16, 2018 at 3:19 pm #437615
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    Holding inventory does not earn money, therefore the lower the inventory the better (the just-in-time concept).

    Throughput accounting treats materials as the only truly variable cost, but the amount spent on materials only varies directly with the numbers if they are not carrying inventory and therefore buying exactly what they need to use in each period.

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