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A manufacturer can sell its single product for $660.Below are the cost data for the product:
Direct Materials $170
Direct Labor 225
Manufacturing Overhead 90
The relevant margin amount when beginning a theory of constrains (TOC) analysis is
Suggested Answer: A
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A theory of constraints (TOC) analysis proceeds from the assumption that only direct materials costs are truly variable in the short run. This is Called throughput .or super variable, costing The relevant margin amount is throughput margin, Which equals price minus direct materials. Thus, the relevant margin amount for this manufacturer is $490 ($660-$170).
24 comments · newest first
TO
Tori
2 days ago
I think it's about calculating the margin.
GL
Glory
7 days ago
This question is tricky.
EL
Elfrieda
12 days ago
Agreed, margin should be higher.
CH
Cheryll
17 days ago
D) $175 is too low for margin.
MA
Mauricio
22 days ago
I added direct materials only.
EN
Enola
28 days ago
That seems low.
MA
Mauricio
1 month ago
I chose C) $265.
EL
Elsa
1 month ago
$660 - ($170 + $225 + $90).
CH
Christiane
1 month ago
How?
EL
Elsa
2 months ago
I got B) $345.
JE
Jerry
2 months ago
Selling price minus total costs.
HI
Hildegarde
2 months ago
Why A)?
JE
Jerry
2 months ago
I feel like it's A) $490.
SU
Suzan
2 months ago
I think it's about calculating the margin.
GE
Gerald
2 months ago
This question is tricky.
IS
Isaac
3 months ago
Totally agree, $265 makes sense!
TR
Trina
3 months ago
Wait, how did you get $490? That seems off.
EL
Elina
3 months ago
I think the relevant margin is $175.
VI
Vincenza
3 months ago
Direct costs total $485.
IO
Iola
3 months ago
The selling price is $660.
LO
Lorrine
4 months ago
I think the answer is $345, which is the selling price minus direct materials and direct labor. That seems to fit the TOC approach, right?
MO
Mozell
5 months ago
I feel like the manufacturing overhead might not be relevant for this calculation, but I can't remember if we should include it in the total costs.
ER
Erick
5 months ago
I remember a similar question where we had to find the contribution margin. If I recall correctly, it was selling price minus variable costs.
TA
Tasia
5 months ago
I think the relevant margin is calculated by subtracting the total variable costs from the selling price, but I'm not entirely sure how to apply that here.