4) Other costing techniques

Question 1

Define Throughput Contribution

Answer 1

= Selling price (revenue) - Direct material cost

Question 2

Rank in what order products should be produced and calculate number of units of each product needed to maximise throughput

Answer 2

Calculate “Return per factory hour” for each product, rank highest to lowest, produce enough to satisfy maximum demand for each product in order until bottleneck resource is used up. Balancing figure units for last product that exceeds bottleneck resource.

Question 3

Cost per factory hour - Calculate

Answer 3

= total factory cost / total time on bottleneck resource

Question 4

Return per factory hour (Throughput accounting) - Calculate

Answer 4

= Throughput contribution / Product’s time on bottleneck resource

Question 5

Throughput accounting ratio - Calculate

Answer 5

= Return per factory hour / Cost per factory hour

Question 6

What are the 3 methods for apportioning joint costs to products?

Answer 6

-Physical measurement

-Market value at split-off point (if given sales price and must be apportioned by sales revenue taking into account volume sold not by selling price per unit)

-Net realisable value/net relative sales value (used if sales price not given or if product is not saleable at split-off point. - calculate by deducting the further processing cost from the final sales price after further processing)

Question 7

How is inventory valued on a statement of profit/loss under the following costing types: Absorption, Marginal, Throughput

Answer 7

-Absorption: at full production cost including fixed overheads

-Marginal: at marginal production cost (direct labour, direct material, and variable production overheads)

-Throughput: at cost of direct materials only

Question 8

Describe the layout top to bottom of an absorption costing profit/loss statement

Answer 8

• Revenue
• LESS Cos (Cos = Opening inventory + Variable cost of production + Fixed cost of production absorbed - Closing inventory)
• (under)/over-absorption of fixed production overheads
• = Gross profit
• LESS Non-production costs
• =Profit/(Loss)

Question 9

Describe the layout top to bottom of a marginal costing profit/loss statement

Answer 9

• Revenue
• LESS Cos (Cos = Opening inventory + Variable cost of production - Closing inventory)
• LESS Other variable costs
• = Contribution
• LESS Fixed costs
• =Profit/(Loss)

Question 10

Describe the layout top to bottom of a throughput costing profit/loss statement

Answer 10

• Revenue
• LESS Cos (Cos = Opening inventory + Direct materials cost - Closing inventory)
• = Throughput contribution
• LESS Operating expenses (total factory costs: all costs that are not totally variable such as direct labour & all overheads)
• =Profit/(Loss)