- October 21, 2021 at 4:48 pm #638726hm1995Participant
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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
? 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?October 21, 2021 at 5:17 pm #638732John MoffatKeymaster
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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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