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On activity 3 in the BPP workbook for throughput accounting, when calculating the “total factory costs” we are given in the question:
5500 labour costs per week
8000 variable overheads per week
450000 fixed costs per year
265000 marketing and admin costs per yearWhy did the answer not take into account the marketing and admin costs? Is it because it isn’t a direct cost of making the product?
Although I do not have the BPP Workbook (only the Revision Kit), what you say they have done is correct – marketing and admin are not production costs.
When calculating the cost per factory hour, it is the costs in the factory (i.e. the production costs) that we use.
Have you watched my free lectures on throughput accounting? The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
Thank you for the clarification. Watching the lecture notes is on my to do list too
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