CPIM Practice Exam

Which output is calculated from revenues and total variable costs?

1. Net profit

2. Throughput

3. Gross Margin

4. Operational Efficiency

The correct answer is: Throughput

Throughput is a critical concept in supply chain management that reflects the amount of money generated from sales minus the variable costs associated with producing those goods or services. Specifically, throughput focuses on the revenue obtained from goods sold and subtracts the total variable costs, which include costs that vary directly with production volume, like materials and labor. By determining throughput, businesses can assess how much money is available to cover fixed costs and contribute to profit. This metric is particularly important in environments where companies aim to optimize production processes and improve overall efficiency. It helps in evaluating the effectiveness of production activities in converting raw materials into finished goods and thus reflects the operational performance of a company. The other choices relate to different financial or operational metrics: - Net profit encompasses all revenues minus all costs, which includes fixed and variable costs. - Gross margin is focused on revenues minus cost of goods sold (COGS) but does not distinctly represent the total variable costs as throughput does. - Operational efficiency pertains to how well a company utilizes its resources, which is a broader concept not specifically calculated from revenues and variable costs. Therefore, throughput is uniquely defined as the calculation derived from revenue and total variable costs, capturing the specific financial outcome relevant to variable inputs in production.