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Hello
Question 80 asks:
A Co needs to decide whether to base its decisions about optimum levels of production using a throughput accounting approach, or a limiting factor approach.
Which of the following is an example of an advantage of choosing a throughput
accounting approach?
? The throughput accounting approach eliminates employee idle time.
? The throughput accounting approach eliminates bottlenecks in manufacturing.
? The throughput accounting approach eliminates the cost of holding inventory.
? The throughput accounting approach is more suitable for short-term decision making than limiting factor analysis.And the answer is: The throughput accounting approach is more suitable for short-term decision making than limiting factor analysis.
I do not understand the statement. I needed an explanation of what it meant to say. How is it more suitable for short term decision making than limiting factor?
Have you watched my free lectures on throughput accounting?
As I state in my lectures, throughput accounting assumes that all costs except for materials are fixed in the short term. In the long-term costs such as labour will not be fixed, but in the short-term they will be (and I discuss examples of what is meant by this in my lectures).
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