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Sir, could you please help me with the question in my Kit.
They give the following information per unit in $:
Selling price-160
Raw material cost – 24
Direct labour cost-66
Variable overhead cost – 24
Fixed overhead cost – 16
Profit – 30They come to the Contribution per unit of $46. But what about assumption of all costs are fixed except materials?We don’t assume this for “limiting factors”?
Contribution is always defined as revenue less all variable costs.
It is only with throughput accounting that we assume that all costs are fixed apart from materials, and then we don’t call it contribution but we call in throughput. Normal key factor analysis does not make the throughput accounting assumption.
If you watch our free lecture on throughput accounting then I first go through an example using standard key factor analysis, and then continue to explain throughput accounting.
Yes, Sir, I remember this from your lecture.I had a doubt, wether this assumption refers only to throughput. Thank you very much for the help.
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