PM Chapter 5 Questions Throughput accounting
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Hi,
In the question #2, the calculation of TAR. I am unclear why budgeted Labour cost of $5 x 100,000 hrs was used instead of Labour cost of $10 to calculate total fixed cost?
The company makes several products. The budgeted labour cost is the budget for the entire company.
Hi please explain were does the 60 comes from ?
Which question are you referring to?
hi John, I believe its on question number 3, if not can please explain on the 60 for question 3
It is because there are 60 minutes in one hour.
I think you are referring to several questions, the reason why it is divided by 60 is because the time taken are given in minutes. Hence, we divide by 60 minutes to convert to hours.
Hi John-
I just wanted to understand in question 2 why we haven’t considered labor cost $10/unit in calculating total factory cost? I see we have taken just $5/ hour – is that because of labour budget?
Yes – it is because they are only budgeting on 100,000 hours of labour.