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Hello Sir,
Question :
A company manufactures a product which requires 4 hrs per unit of machine time. machine time is the bottleneck resources as there are only 10 machines available for 12 hrs per day , five days per weeks. The SP is 130 and DM is 50 per unit , labour costs is 40 per unit, factory OH is 20 per units. Productions and sales – 150 units .
Calculate TPAR ?
My answer : TPAR= Return per factory hrs/cost per factory hrs = ((130-50)/4)/5= 4
As per answer: 1.33 ..
can u let me know where am I going wrong here ?The cost per factory hour = 60 per unit / 4 hours per unit = 15 per hour.
The TPAR = ((130 – 50) / 4 ) / 15 = 1.33
But why did you divide it by 4 ? dont we divide it by machine available hours i.e, 12 hrs ?
If we knew the total factory costs then we would, but we don’t. We know the factory costs per unit and we know the hours per unit, therefore we can calculate the factory cost per hour.
okay if we would have known the hrs they work each day , then we would have calculated as 12/XX , right?
No.
There are 10 machines working 12 hours a day. So in total there are 120 hours available.
That means they can make 120/4 = 30 units a dayThe total factory cost per day is therefore 30 x (40 + 20) = $1,800
The hours per day are 120 hoursTherefore the cost per factory hour = $1,800 / 120 = $15
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