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CMA Final · Strategic Cost Management · Throughput Accounting

In throughput accounting, as used in Strategic Cost Management, throughput contribution of a product is defined as:

Throughput is sales revenue less totally variable cost, usually direct materials only. Labour and overheads are treated as operating expenses in the short run, so they are not deducted, which distinguishes throughput from marginal costing contribution.

  1. ASelling price less direct labour cost
  2. BSelling price less total variable cost including labour and variable overheads
  3. CSelling price less direct material (totally variable) costCorrect
  4. DSelling price less absorbed factory cost

Explanation

Throughput accounting treats only totally variable costs, mainly direct materials, as relevant to throughput. Throughput = sales revenue minus direct material cost. Labour and overheads are treated as operating (conversion) costs and not deducted. Option B describes marginal costing contribution.

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