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Throughput accounting

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  1. In revision kit they say inventory should be kept at 0 not even minimum while in bpp they say inventory should be kept minimum so that once bottleneck resource becomes available production can continue….why are they confusing us???

    • I don’t think they are trying to confuse you 馃檪

      In an ideal world inventory would be kept to zero. In practice (as you will know from just-in-time) it is not practical for it to be zero but should be kept to a minimum.

      Since you are obviously not watching the free lectures (because this is not the correct page) you should ask questions in the Ask the Tutor Forum and not as a comment on a lecture that you have not watched!!!!

  7. Please, tutor, help me on this:
    The cost card per unit for a product is as follows:

    Materials 9
    Labour (1hr) 6
    Other production costs 8
    Total 23

    The selling price is $30 per unit and each unit requires 6 minutes of machine time. Machine time is a bottleneck resource.
    What is the return per factory hour ( in a throughput accounting environment) ?

    Solution:
    The throughput per unit = 30 – 9 = 21
    The machine time per unit = 6 minutes = 6/60 or 0.1
    Return per factory hour = 21/0.1 = 210

    My question is, where is that ’60’ coming from?
    Thanks.

  8. Thank you Mr John Moffatt, your lectures are insightful… I also appreciate ACCA and all partners for laudable opportunities you offer to would-be accountants, irrespective of locations.

  9. Dear Sir,

    I’m following your lectures for F5 and this is the 4th chapter. The theoretical part seem fairly easy for me however, when I attempted some exam questions re this topic I always got something wrong! Sometimes I get confused which no of hrs to use when working cost per factory he. Theoretically I know that I should use the no. Of hrs on the bottleneck resource but when I search for the numbers I get confused! The question is too long!

    Are there any suggestions which can help?

    Thank you

    • In future please ask this sort of question in the Ask the Tutor Forum and not as a comment on a lecture 馃檪

      If you understand the idea, then there is no other solution but to practice. Practice on exam-standard questions in your Revision Kit is the most vital thing of all, to get used to the style of questions and get better at finding the right numbers.

  12. sir i have started studying F5 7 days back and came accross this site.. proviede i study hard using ur lectures.. is it possible to pass the F5 exam in march 2016 exams?… i mean to ask if this is a possible task?

    • Throughput return per factor hour is the throughput (selling price less material cost per unit) divided by the hours per unit.

      There is no such term as ‘throughput factory per hour’. However, throughput factory cost per hour is the total costs in the factory (apart from materials) divided by the total hours available.

      Both of these terms are in fact explained in the lectures.

  17. 1) Why you solve throughput question by marginal approach using Contribution?
    2) In assumption “Cost card prepared based on producing to meet maximum demand” means?
    3) The Correct solution of this problem is using all cost as fixed cost except Material such as $15 for A and $6 for B, Right?

    • We don’t use contribution if it is throughput accounting!
      In normal key factor analysis we use contribution because as production changes it is only the sales revenue and variable costs that will change – the total fixed costs will not change.

      If it is throughput accounting, we use the same logic but assume that the only variable cost is materials. Therefore effectively the contribution becomes sales less materials, but we call it the throughput.

      If the cost cards were prepared assuming we produce to meet maximum demand (because when they were prepared they did not know there would be a limit on the time and therefore they would not be able to produce in full). Then the fixed overheads would have been absorbed on the basis of producing to meet full demand. (The absorbing of overheads is Paper F2, although in F5 you will not be asked full absorbing exercises as are asked in F2).

      I do suggest that you watch the lecture again, because I do explain all of this in the lecture.

  18. HELP: Company makes 2 products:

    X Y
    Selling $50 $32
    Mat $10 $6
    DL $20 $15
    Assem Time 20 mins 15 mins
    Max Demand 1500 units 1000 units
    Max limited 600 hrs
    How many units should Y produce: answer 400 Units – HOW?

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