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Hi,
i wanted to ask when you are told to calculate the mix of units using TA ratio and then calculate the net profit, do u charge the variable OHs (if any) on the old units mentioned in the Q or the new units that we have calculated with the TA ratio???I think what you are talking about is the total for ‘fixed’ costs (in throughput these are all costs except for materials – labour+variable overheads+fixed overheads).
You will probably be given the total in the question, in which case obviously use that total.
If you are not given the total then assume that the original costing were done before knowledge of the limited hours – that is assuming therefore that we produce each product to the level of demand.
That means that the total ‘fixed’ costs will be got by multiplying the demand by all the units costs (except material) for each product and then adding up the total.
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