ACCA Performance Management (F5) Certification Practice Exam

How is throughput calculated?

1. Sales revenue multiplied by direct labor cost

2. Sales revenue minus direct material cost

3. Total revenue divided by total units produced

4. Total costs divided by sales price

The correct answer is: Sales revenue minus direct material cost

Throughput is a key concept in operational management and is particularly relevant in the context of a production environment. It measures the rate at which a system generates money through sales, essentially highlighting the efficiency and profitability of operations. The definition of throughput specifically refers to sales revenue minus the direct material costs associated with producing those sales. This approach emphasizes the value generated from products sold after accounting for the costs that are directly tied to the materials used in production. By focusing on the sales revenue minus direct material costs, businesses can assess their performance in generating income while controlling the direct material inputs. This focuses on a crucial aspect of production management, highlighting the importance of managing material costs effectively to enhance profitability. By understanding throughput in this way, organizations can make more informed decisions about pricing, production quantities, and cost management strategies, ultimately leading to improved financial performance.