ACCA Applied Skills · Performance Management · Throughput accounting
Trent Ltd uses throughput accounting. Product Q sells for $50 per unit, with direct material cost of $18 per unit, direct labour of $10 per unit and variable overheads of $4 per unit. Under throughput accounting, what is the throughput per unit of Product Q?
Throughput per unit is $32, being the selling price of $50 less direct material of $18. Throughput accounting treats labour and overheads as fixed factory costs in the short run, so only totally variable costs, usually materials, are deducted from sales revenue.
- A$18
- B$32Correct
- C$28
- D$22
Explanation
Throughput accounting defines throughput as sales revenue less totally variable costs, normally direct material only. Throughput = 50 - 18 = $32. The $28 option wrongly deducts only labour as well as material... actually it deducts variable overhead (50-18-4), and $22 deducts labour and overhead too (50-18-10); labour and overheads are treated as factory costs.
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