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Hello,
Kindly explain why in throughput, we use materials purchased cost rather than cost of the material used in production
Thank youThis is actually unlikely to be a problem in the exam because we calculate the throughput on a per unit basis.
Throughput is looking at the costs that will vary from day-to-day or from week-to-week in the short-term, and it is the amount of materials purchased that is more relevant.
That is why ideally with throughput accounting it is necessary that inventories are kept to an absolute minimum (because then the purchases will be the same as the amounts used in production).
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