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Throughput Costing

This document discusses throughput costing and accounting. It provides definitions and formulas for throughput, net profit, return on investment, inventory turnover, and return on investment. It also discusses the theory of constraints, noting that constraints establish the limits of any system's performance. Finally, it briefly compares conventional cost accounting to throughput cost accounting and lists some merits and limitations of throughput accounting.

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Saurabh Unmesh Upadhyay
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2K views8 pages

Throughput Costing

This document discusses throughput costing and accounting. It provides definitions and formulas for throughput, net profit, return on investment, inventory turnover, and return on investment. It also discusses the theory of constraints, noting that constraints establish the limits of any system's performance. Finally, it briefly compares conventional cost accounting to throughput cost accounting and lists some merits and limitations of throughput accounting.

Uploaded by

Saurabh Unmesh Upadhyay
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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GROUP MEMBERS:

ROHAN PATEL

MAMTA GALA
DHARA PATEL

What is Throughput Costing?


Throughput costing is a system whereby

only direct material cost is considered as variable and all other costs are treated as period cost.

THROUGHPUT ACCOUNTING
FORMULAS:
1) Throughput = Revenue - Purchased material cost. 2) Net Profit = Throughput Operating expenses. 3) ROI = (Throughput Operating expenses)/ Inventory. 4) Inventory turnover = Throughput/ Inventory.

5) ROI = (Net profit/

Throughput)*(Throughput/Investment)

THEORY OF CONSTRAINTS
The fundamental assumption of TOC is that the

constraint establish the limits of performance of any systems.


TOC suggests the managers to focus on how to

manage these constraints in improving the overall performance of their organizations.

The constraint usually consists of :

Managerial constraint 2. Capacity constraint 3. Market constraint 4. Logistical constraint


1.

CONVENTIONAL COST ACCOUNTING

v/s

THROUGHPUT COST ACCOUNTING

MERITS OF THROUGHPUT ACCOUNTING

LIMITATIONS OF THROUGHPUT ACCOUNTING

THANK YOU.

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