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I know a question in the kit about throughput accounting where we are not told labor hours per unit (but do not remember where it is but figures are different)
Products————————————A———B———C———D
Selling Price per unit——————-400——300——200——150
Material cost per unit——————-125——100——90———60
Labor cost per unit———————-120——-80——-50———20
Production Overhead per unit——–100——-60——-30———50Production units per hour————–300——-250——200——100
(Question)
What is the production ranking of product Y?We are not told what is the labor hour per unit that each product is taking so how can we able to rank them?
(Answer)
Products————————————A———–B————C———–D
Throughput cost per unit————–275——–200———110———90
Production units————————-300——–250———200——–100
Total Throughput return————$82500—-$50000—-$22000—-$9000
Rank—————————————1st———-2nd———3rd———4thIf we do not know the labor hour per unit for each product taken then we would rank the products on total throughput return (or total throughput cost).
Is that correct?
But we do know the hours per unit, and they must be ranked on the throughput return per hour (not simply on the throughput return).
A can be produced at the rate of 300 per hour, therefore the time per unit is 1/300 hours.
The throughput return per unit is $275.
Therefore the throughput return per hour is 275/(1/300) = $82,500.BUT you are considering that every product is taking one hour to make their units but this might not be the case!!!
Such as in your example 1 (chapter 5) of the notes we do have 2 hrs per unit for product A and 1 hrs per unit for product B. In my example, we do not know the hours that every product is taking unless we assume that every product is taking one hour to make their units.
So you are saying that when we do not know that how many hours every product is taking then we do assume that every product is taking one hour. (correct?)
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