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reducing the time spent per unit will improve TP ratio?
the answer given is NO – it says the Return/fact hr and the cost/fact hr are both affected in the same way thus no change.
now, when we reduce the time, Return will go up – i get that.
but how does it affect the cost/fact hr??
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i have a related question to this as well… but will ask after i get the answer
thank u!
I hope that this question is not in our online test but in your book!
Because the answer is wrong – reducing the time spent will increase the TAPR.
its in the text… i am reproducing it
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when machine time is a binding constraint on production output, which of the following will have NO EFFECT on the throuput accounting ratio for a product that the machine is used to manufacture?a. obtaining a lower purchase price for materials
b. reducing factory costs
c. reducing the machine time per unit to make the product
d. increasing selling price of the productanswer is c.
below is what they have written:
reducing material costs or increasing sales price will increase tp per machine hour. these will increase the tpar. reducing the machine time per unit will increase tp per hour and factory cost per hour by the same proportion, leaving tpar unchanged.
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