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ACCA Applied Skills · Performance Management · Throughput accounting

Which of the following best describes the objective of throughput accounting?

Throughput accounting aims to maximise throughput contribution per unit of the bottleneck resource, because the bottleneck limits total output. Producing more elsewhere just builds unwanted inventory, which this approach tries to avoid.

  1. ATo maximise throughput return per unit of the bottleneck resourceCorrect
  2. BTo maximise the number of units produced by every department
  3. CTo minimise the labour cost of each product
  4. DTo maximise inventory to protect against stoppages

Explanation

Throughput accounting seeks to maximise throughput (sales less material cost) through the bottleneck constraint, which limits output. Maximising output from non-bottleneck departments only builds inventory. Holding extra inventory is contrary to the JIT philosophy that goes with throughput accounting.

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