Throughput

Hi John,

I wondered why we don’t just calculate the below with throughput: SP minus Material Cost. How can you tell when you minus Selling Price with Material cost or Variable Cost before doing the ranking?

A company has the following production planned for the next four weeks. The figures reflect the full capacity level of operations. Planned output is equal to the maximum demand per product.
Product A B C D
$ per unit $ per unit $ per unit $ per unit
Selling price 160 214 100 140
Raw material cost 24 56 22 40
Direct labour cost 66 88 33 22
Variable overhead cost 24 18 24 18
Fixed overhead cost 16 10 8 12
Profit 30 42 13 48
Planned output 300 125 240 400
Direct labour hours per unit 6 8 3 2

Many thanks,

Maddi.