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Tnks john for a wonderful lecture. Pls can u throw more light on the reasons why d profit is lower using through put than the key factor analysis.thank you
Because of the limited hours we are only able to produce less than the demand.
With normal key factor analysis, producing less earns less revenue, but also saves on all the variable costs.
With throughput accounting, we earn less revenue, but the only cost saved is that of materials.
So we save less cost and therefore make less profit.
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