Throughput Accounting Ratio is a ratio of throughput and sum of labour and overheads. As the purpose of Throughput Accounting is solely the short term. All the attention is put on the removal of bottleneck resources.
Formula
Throughput Accounting Ratio = Throughput / (Labour + overheads)
Where:
Throughput = Sales – direct material
Throughput Accounting Ratio above is considered a good one because the entity would be able to meet its labour and overhead payments from the throughput earned.
Example Question
Alpha industry annual sales turnover is $20,000. The material cost, labour and overheads are $8,000, $3,000 and $3,000 respectively. Calculate throughput ratio.
Answer Solution
Throughput Accounting Ratio = Throughput / (Labour + overheads) = (20,000 – 8,000) / (3000 + 3000) = 12,000/6000 = 2