ACCA PM · Guided practice (Show me how)
Chapter 5: Throughput accounting
Throughput accounting: return per bottleneck hour, TPAR and the bottleneck
Pi plc manufactures 2 products, A and B. The cost cards are as follows:
| A $ | B $ | |
|---|---|---|
| Selling price | 25 | 28 |
| Materials | 8 | 20 |
| Labour | 5 | 2 |
| Other variable costs | 7 | 2 |
| Fixed costs | 3 | 2 |
| Total cost | 23 | 26 |
| Profit | 2 | 2 |
| Machine hours p.u. | 2 hrs | 1 hr |
| Maximum demand (units) | 20,000 | 10,000 |
The total hours available are 48,000. Calculate the optimum production plan and the maximum profit on the assumption that in the short term only material costs are variable, i.e. using a throughput accounting approach, and calculate the throughput accounting ratios.
Part (d). Yam Co processes sheet metal into products A, B and C through three processes, pressing, stretching and rolling, in that order. Processing time per metre in hours: pressing A 0.5, B 0.5, C 0.4; stretching A 0.25, B 0.4, C 0.25; rolling A 0.4, B 0.25, C 0.25. The factory operates for 225,000 hours. Identify the bottleneck process.
(a) Throughput and the return per machine hour
Calculate Pi plc's throughput per unit and return per machine hour for A and B.
(b) The optimum plan and profit
Prepare Pi plc's optimum production plan and calculate its maximum profit.
(c) The throughput accounting ratios
Calculate Pi plc's cost per factory hour and throughput accounting ratio for each product.
(d) Yam Co: find the bottleneck
Calculate Yam Co's process capacities for product A and identify its bottleneck process.
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