CMA Final · Strategic Cost Management · Throughput Accounting
Sharma Components Ltd sells a gear for ₹900 per unit. Direct material cost is ₹300 per unit. Direct labour is ₹120 per unit, but labour is a fixed weekly wage and the other factory costs are also fixed. Under throughput accounting, what is the throughput per unit?
Throughput per unit is ₹600, being the selling price of ₹900 less the totally variable cost, which is only direct material of ₹300. Labour is a fixed weekly wage and is therefore treated as an operating expense, not deducted in throughput.
- A₹600Correct
- B₹480
- C₹780
- D₹300
Explanation
Throughput = sales price minus totally variable cost, which is usually only direct material. So 900 - 300 = ₹600. Subtracting labour as well (₹480) wrongly treats a fixed cost as variable.
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