CPIM Practice Exam

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What is the throughput per year if sales revenue equals $250 million and total variable costs equal $100 million?

$2.5 million per year
$100 million per year
$150 million per year
$350 million per year

The correct answer is: $150 million per year

Throughput is a financial metric that represents the revenue generated from sales minus the variable costs associated with producing goods. To calculate throughput, you subtract the total variable costs from the sales revenue. Given the sales revenue of $250 million and total variable costs of $100 million, the calculation is as follows: Throughput = Sales Revenue - Total Variable Costs Throughput = $250 million - $100 million Throughput = $150 million This result signifies that the company effectively earns $150 million after accounting for the variable costs of production, which is why this figure is regarded as the throughput per year. This concept is crucial in operations management, as it helps businesses understand the relationship between sales, costs, and profitability.