ACCA Performance Management (F5) Certification Practice Exam

In throughput accounting, what is considered the main variable cost in the short term?

1. Raw materials purchased from external suppliers

2. Direct labor costs

3. Utility expenses

4. Depreciation costs

The correct answer is: Raw materials purchased from external suppliers

In throughput accounting, the primary focus is on maximizing throughput, which is the rate at which a company generates sales revenue through its core products. The main variable cost in this context is raw materials purchased from external suppliers. This is because, in the short term, throughput accounting emphasizes the cost of producing goods directly related to the materials needed to create those goods. Raw materials are considered variable costs since their cost fluctuates with production levels. As production increases, the consumption of raw materials also rises, directly impacting the overall cost structure. In contrast, the other costs listed are typically seen as fixed or semi-variable in nature over the short term. For example, direct labor costs may include some fixed components, utility expenses can also have fixed elements, and depreciation is a non-cash, fixed cost that does not directly correlate to production levels. Therefore, raw materials are the main variable cost directly tied to the throughput of production and sales, making it the correct choice in this context.