Hello Sir, I would like to know that
Why don't we include variable overheads in the variable costs while calculating the throughput?
Why don't we include variable overheads in the variable costs while calculating the throughput?
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Throughput accounting
14y ago#1Because in throughput accounting we assume that the only variable cost is materials, and that all other costs are effectively fixed.
(In practice, for many business (not all) this is actually likely to be true in the short term - most businesses produce more some week and less in other weeks, but the expenses stay more or less fixed each week. Except for materials - if they produce less they spend less on materials.)
(In practice, for many business (not all) this is actually likely to be true in the short term - most businesses produce more some week and less in other weeks, but the expenses stay more or less fixed each week. Except for materials - if they produce less they spend less on materials.)
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