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Hi Sir,
I have a question that gives information on two products, with values such as selling price, material cost, labour cost, variable OH, fixed OH.
I am being told the maximum demand for each product and material is the limited resources.The question asked for the production plan to maximise profit.
I did throughput/kg. The ranking that I got was different from if contribution/kg was used instead.So I am unsure when is the time to use throughput and when is the time to use contribution.
I assumed that since material is the bottleneck resources, we should use throughput.
In the exam it is always key factor analysis (using contributions) unless you are specifically told to use throughput.
Also, throughput is only relevant anyway when it is time that is the limited factor.
Oh!
Okay, so the key point here I should note now is to use throughput if time is the limiting factor, is that right?
Or even if the question stated time is the limiting factor but does not specify to use throughput accounting, I should continue using contribution?
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