Throughput — OpenTuition Forums

Aaisha11y ago

Hi sir, help me for the following Sir in your lecture you mentioned that to get throughput we deduct materials cost from the total sales. Which material cost? i mean to say direct material cost or indirect or both? Moreover under throughput approach if there is non manufacturing variable cost then what should we do? Thanx

John MoffatTutor11y ago#1

It is only ever the cost of direct materials that is relevant for calculating the throughput and hence the return per factory hour. All other manufacturing costs are relevant only for calculating the cost per factory hour (whether they are fixed or variable). Non-manufacturing costs (whether fixed or variable) are not relevant anywhere for the throughput decision making process.

Aaisha11y ago#2

Thanks sir thanks. great explanation sir

John MoffatTutor11y ago#3

You are welcome :-)