Page 45 - P1 Integrated Workbook STUDENT 2018
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Other elements of cost accounting systems
Throughput accounting
2.1 Definitions of terms used in throughput accounting
In throughput accounting, the only cost that is deemed to relate to volume of output is
the direct material cost. All other costs (including all labour costs) are deemed to be
fixed.
Throughput contribution = Revenue – direct material costs.
Operating expenses All expenses, excluding direct material costs.
Net profit = Throughput contribution – operating expenses.
Investment All the money the business invests to buy the things
that it intends to sell and all the money tied up in assets
so that the business can make the throughput.
Return on investment = net profit/investment.
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