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hi sir john.. thanks in advance
my question is one company produce a product that has material cost of $10 p.u. direct labour cost $7 p.u and selling price is $40 p.u. the total direct labour for the year is 50000 hours at a cost of $12 per hour. factory costs are $2920000 per year.
under throughput accounting machine time is identify as bottelneck and product require 0.01 hour of machine time per unit and maximum machine time is 4000 hours per year. what is the throuhput ratio for a product???here only varable cost is material and all the other costs are fixed.. my question.. shall i take direct labour of $7 p.u in to factory cost… pls explain.. thank you ..
Assuming that there was nothing else said in the question, then yes – you should add the total labour cost to the total factory costs.
(The question is actually badly worded (assuming again that you have typed the whole question) – it should really make it more clear as to whether the factory costs already include the labour or not. I hope it is not one of our questions 🙁 )
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