Throughput Accounting makes best use of limited resource (bottleneck) in a JIT enviroment. TA is a way 2 measure profitability.
TA= sales revenue-direct material cost
TA maximises profit and reduces opreating cost and inventory. Goal is achived by determining the bottleneck. In short term best use must be made of bottleneck. In long term bottleneck should be eliminated.
assumptions: the only variable cost is purchase of raw material. direct material are not variable in short term.
assumptions: the only variable cost is purchase of raw material. direct material are not variable in short term.
TAR= throughput per hour / operating expense per hour
bad : TAR concentrates on short term, difficult 2 apply in long term cause all cost are variable in long term. long term, ABC approach will be more suitable.
improving TAR : increase sales price per unit, reduce material cost per unit, reduce total operating costs, improve productivity of bottleneck.
TAR > 1 = making profit
TAR < 1 =" making">
TAR < 1 =" making">
bad : TAR concentrates on short term, difficult 2 apply in long term cause all cost are variable in long term. long term, ABC approach will be more suitable.
improving TAR : increase sales price per unit, reduce material cost per unit, reduce total operating costs, improve productivity of bottleneck.
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