CMA Final · Strategic Cost Management · Throughput Accounting
Sagar Foods Ltd has a bottleneck of 900 hours a month and total operating costs (labour and overheads, all fixed) of Rs 2,70,000. It makes only one product, selling at Rs 1,000 with material of Rs 400, and each unit uses 1.5 bottleneck hours. Demand is unlimited. What is the monthly profit under throughput accounting?
Monthly profit is Rs 90,000. The bottleneck limits output to 900 / 1.5 = 600 units, each giving throughput of Rs 600, so total throughput is Rs 3,60,000. Deducting the fixed operating costs of Rs 2,70,000 leaves Rs 90,000.
- ARs 3,30,000
- BRs 90,000Correct
- CRs 3,60,000
- DRs 2,70,000
Explanation
Units = 900 / 1.5 = 600. Throughput = 600 x (1,000 - 400) = Rs 3,60,000. Profit = 3,60,000 - 2,70,000 = Rs 90,000. Rs 3,30,000 deducts operating costs from sales instead of throughput, and Rs 3,60,000 ignores operating costs.
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