Throughput Accounting (3) Flashcards

1
Q

Traditional costing (labour costs)

A

Labour costs and variable overheads are treated as variable costs

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2
Q

Traditional costing (Inventory)

A

Inventory is valued at total production cost

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3
Q

Traditional costing (Value)

A

Value is added when an item is produced

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4
Q

Traditional costing (profitability)

A

Product profitability can be determined by deducting a product cost from selling price

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5
Q

Throughput accounting (fixed costs)

A

All costs other than materials are seen as fixed in the short-term

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6
Q

Throughput accounting (Inventory)

A

Inventory is valued at material cost only

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7
Q

Throughput accounting (Value)

A

Value is added when an item is sold

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8
Q

Throughput accounting (profitability)

A

Profitability is determined by rate at which money is earned

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9
Q

What are total factory costs?

A

Fixed production costs including labour

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10
Q

What is return per factory hour?

A

(Sales revenue - material purchases)/Time on bottleneck reosurces

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11
Q

What is cost per factory hour?

A

Total factory costs/Time on bottleneck resource

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12
Q

What is TPAR?

A

Return per factory hour/Cost per factory hour

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13
Q

What is TPAR used to check?

A

How a product is performing by comparing the returns it delivers with the costs incurred in producing it

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14
Q

What is meant by factory costs or conversion cost?

A

These are all costs except direct material cost

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15
Q

Why should TPAR exceed 1?

A

As total throughput should exceed total factory costs otherwise organisation will make a loss

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16
Q

Another way for TPAR to be used?

A

Assess the relative earning capabilities of different products.