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A company manufactures several products. One of them has a selling price of $60 per unit;material costs of $15 per unit; and labour costs of $10 per unit.
The labour budget for the year is 100,000 hours at a cost of $5 per hour.
The machine time for this product is budgeted at 0.2 hours per unit, and it is machine time that is the bottleneck resource with a total of 5,000 hours available per year.
Factory overheads are $250,000 per year.
What is the throughput accounting ratio for this product?
A 1.50
B 0.67
C 1.17
D 4.50can someone supply me with the workings for this please?, the correct answer according to the answer section is B
According to me the correct answer is A.
Here are the workings
Firstly Throughput Accounting Ratio (TPAR) is Throughput per bottleneck resource/Factory cost per bottleneck resource
we calculate throughput per bottleneck resource as
S.P 60
-MC 15
=Throughput $45 p.uthroughput per bottleneck resource ( TPBR) = $45 per unit/0.2 hours per unit
Thus, TPBR= $225
Now, finding the factory cost per bottleneck hour= Total factory cost/ limited hours
i.e. Total FC= fixed costs ($250000)+Labour costs (100000 hrs*$5= $500000)
total FC = $750000
Limited Hours= 5000 hours
Thus, FC per bottleneck hour = 750000/5000= $150
TPAR= TPBR/ FC per bottleneck hour
= $225/$150
=1.5
If someone could please confirm this, would be great.
Thanks
Greengiant:
Your question is from Chapter 5 and not from Chapter 4.
The answer at the back of the notes is given as A (not B) and it does show the workings!!
(The reason you did not receive an answer from me earlier is because I normally only answer questions in the Ask the Tutor forum – this forum is for students to help each other.)
Vapiano:
Your workings are correct (and are the same as the workings shown in the free Lecture Notes).
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