If the direct material cost of goods sold is $7500 and the throughput contribution is $15650, total revenues are _________?
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Answer: B. $23,150
Explanation
Throughput contribution is defined as revenues minus the direct material cost of goods sold. Rearranging this standard accounting formula isolates total revenues on one side of the equation. Adding fifteen thousand six hundred fifty and seven thousand five hundred gives twenty-three thousand one hundred fifty. Throughput costing treats all costs except direct materials as completely fixed period expenses. Direct material cost of goods sold reflects raw material expenses tied directly to sales. Throughput contribution measures how efficiently a company generates revenue from bottleneck resources.
Constraint management strategies rely heavily on throughput contribution metrics to maximize profitability. Businesses operating under synchronous manufacturing principles utilize these exact formulas daily. Evaluating revenue generation helps executives optimize short-term operational throughput and sales mix. Option A understates total revenue by failing to include the correct material costs. Option C overstates revenue due to an improper addition error during calculation steps. Option D incorrectly assumes a lower material cost base than provided in the prompt.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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