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Hi Sir,
I have confusion on the technical article from ACCA website about the Throughput accounting and the theory of contraints, part 2. The example is Cat co makes a product using 3 machines – X, Y and Z. In the solution, buy Z will need additional sales units = 600-500=100 units, buy Z and Y would need additional sales units = 800-500=300 units, and buy Z,Y&X require additional sales units=1,000-500=500 units. I don’t understand this concept. Are these sales units are assumption or else?
Thank you.
The question tells you that demand is 1,000 units a week.
But although they would therefore like to produce 1000 units per week, on the current capacities they are only capable of producing 500 (and selling) units a week (because the units have to be worked on by all three machines, and Z can only work on 500 units a week and so slows everything down).So…..they want to make Z work faster. They can do this by ‘Purchase 3’ because then Z is capable of working on 1,050 units. However X can still only work on 600 units, so that is then the slowest machine and so they can then produce (and sell) 600 units.
So they can make X faster by ‘Purchase 1’, and the same thinking applies.
Thank you for the explanation, Sir. I understood with the concept now. But i am still not clear with the logic of formula to get additional sales units. In this case for buy Z is 600-500=100 units. Then for buy Z and Y, additional sales units 800-500=300 units. Buy Z, Y anf X the additional sales units =1,000-500=500 units.
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