CMA Final · Strategic Cost Management · Throughput Accounting
Under throughput accounting as used in Theory of Constraints, which one of the following costs is treated as a truly variable cost when computing throughput for a product?
Raw materials bought from outside suppliers and consumed in the product are the truly variable cost in throughput accounting. Throughput equals sales less such costs. Fixed-wage labour, rent, depreciation and salaries are treated as operating expenses, not deducted when computing throughput.
- ADirect labour paid on a fixed monthly wage
- BFactory rent and depreciation
- CRaw materials purchased from outside suppliers and consumed in the productCorrect
- DSupervisors' salaries
Explanation
Throughput is sales revenue minus totally variable costs, which are mainly purchased direct materials (and items such as bought-in components or sales commission). Fixed-wage labour, rent, depreciation and salaries are operating expenses that do not vary with output in the short run, so they are excluded from throughput.
Did you get it right without looking?
One question tells you little. A timed set on Throughput Accounting shows your real accuracy, how long you take and where you lose marks.
More Throughput Accounting questions
- Ranjit Auto makes component K in-house using Rs 60 of material and 3 bottleneck hours per unit. A supplier offers K at Rs 150 per unit. Any …
- Arjun Industries has 2,500 hours of bottleneck machine time. Product A: price Rs 300, material Rs 120, 2 hours per unit, demand 500 units. P…
- Sharma Components Ltd sells a product at Rs 900 per unit. Direct material cost is Rs 400 per unit, direct labour is Rs 150 per unit and fact…
- In throughput accounting, as used in Strategic Cost Management, throughput contribution of a product is defined as:
- Under the theory of constraints, after the bottleneck has been fully exploited and subordinated to, what is the next step in the five focusi…
- Iyer Engineering makes a product with selling price Rs 1,200 and material cost Rs 700 per unit. The bottleneck machine takes 2.5 hours per u…