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Dear Sir,
I have confusion on the answer for 1 of BPP question bank taken from the study text. This is the case. CD plc produces a single product, the BC, which passes thru 3 diff processes, Alpha, Beta and Gamma. The throughput per hour of the 3 processes is 25, 30 and 32 units of BC respectively. The organization operates for ten hours a day, 5 days a week for 50 weeks of the year. The BC can be sold for $ 420 per unit and it has a material cost of $170 per unit. The annual conversion costs will be $1,800,000. What is the throughput ratio per day? (to 2dp).
The answer: Throughput return per day is $(420-170) x 250 = 62,500.
Conversion costs per day is $1,800,000/(5×50) =$7,200.
TAR = 62,500/7,200 = 8.68.
My question is why the calculation to get throughput return per day is 250 (from 25 units of BC from Alpha process multiply with 10 working hours per day)? I thought we must sum up 25+30+32 units of BC = 87 units x 10 days = 870 days instead only 250. For me the question not really clear. Please your advice.
Thank you.Please do not copy out full questions – they are copyright of BPP and it is therefore illegal for us to have them on our website.
I have the current edition of the BPP Revision Kit, and so just give the number of the question.The question is actually clear.
There is only one product passing through three separate processes, and the bottleneck process is process Alpha (because it is the slowest process). We calculate the TPAR on the bottleneck process, because this is the process that we need to use the most efficiently.
Noted to not copy the full questions in the future. Understood with your explanation about TPAR as well. Thank you so much Sir.
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