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hello Sir, I’m super confused about this question.
Ok so this question is in kaplan kit ”Flopro” and also in BPP study text and the treatment to deduct variable overheads as fixed costs using throughput analysis to get net profit is different in the two sources.1. BPP book they’ve multiplied the v.c/unit x normal production level
2.Kaplan kit, they’ve multiplied the v.c/unit x what we actually produced.
the second treatment makes more sense but I really don’t know what is the correct approach. Can you please help??
Here is an extract from the question:
”Original estimates of production/sales of products A and B are 120,000 units and 45,000 units respectively. The selling prices per unit for A and B are $60 and $70 respectively.
Maximum demand for each product is 20% above the estimated sales levels. ”But I explain this in my free lectures!!!
Given that throughput accounting treats variable costs as fixed in the short term (apart from materials) the total variable costs will stay at their budgeted level regardless of the actual level of production. What BPP has done is correct.
I do suggest that you watch the lectures.
Really sorry, I do remember that now and I have kept all your lecture notes to revise at the end. Thanks again for repeating!!
And I’ve covered my entire PM watching your lectures only :PI hope you’ll forgive me for being so careless and forgetful to make you repeat.
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