ACCA PM Chapter 5 - Key Factor Analysis VS Throughput Accounting

Key Factor Analysis

Contribution = Selling Price - Variable Costs.
Contribution = Profit before Fixed Costs.

Contribution per hour = Contribution / hour

Fixed Costs,
(Assume that original costings were done before knowing about the limit on hours - produce to equal demand)

Contribution - Fixed Costs = Maximum Profit.



Throughput Accounting

Assume the ONLY Variable Cost is Materials.
(ALL Other Costs fixed in total).

Throughput = Revenue - Material Cost.

Return per factory hour = Throughput per hour.

Fixed Costs,
(All Costs other than Materials).
Throughput - Fixed Costs = Maximum Profit.

Total factory costs = all production costs except materials

Cost per factory hour = Total factory costs / Available hours

Throughput Accounting Ratio = Return per factory hour / Cost per factory hour.



Bottleneck

The rate of production will be restricted by the slowest of the machines, and this machine is known as the bottleneck resource.


Source: https://opentuition.com/acca/pm/acca-performance-management-pm-lectures/