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
y 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
y The fundamental assumption of TOC is that the

constraint establish the limits of performance of any systems.

y TOC suggests the managers to focus on how to

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

y 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

y MERITS OF THROUGHPUT ACCOUNTING

y LIMITATIONS OF THROUGHPUT ACCOUNTING

THANK YOU .