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1.units produced 500
time taken 200 hrs
maximum time available 200 hrs
sales 9000sir, to calculate return per factory hour and TPAR which hours should be used? time taken or maximum time available?? In above question both time is given 200 but if different hours are given what should we use?
2. units produced 1150
units sold 800
materials purchased $13000
labour costs $6900
overheads $4650
sales price $35
what is tpar?a.0 b.0.8 c.1.3 d.1.5
sir i got answer 0. because there was not machine hours so how can we calculate return per factory hour and TPAR?
1. You would use the maximum time available.
2. I don’t know where you found the question, but it is not possible to calculate the TPAR – there is not enough information.
Are there not answers and explanations in the same book in which you found the questions? There is not much point in studying questions for which you do not have answers 🙂
units produced 1150
units sold 800
materials purchased $13000
opening material inventory used $7250
labour costs $6900
overheads $4650
sales price $35
there is no opening inventory of finished goods and closing inventory of materials.question is, what is the throughput accounting ratio for this product?
answer:
throughput= 35*80- 13000= 15000
total factory costs= 11550
TA ratio = 15000/11550= 1.3
isn’t the formula of TPAR is ”return of factory per hour/ operating cost per hour” ..
here in above que, TPR is directly calculated by ‘throughput/conversion costs’.. i got confused.sir if we have to rank products in order which has bottleneck hours how should we rank it?… according to return per factory hour or according to throughput ratio? I was doing ques correctly by ranking the product by return per factory hour but i came across with 1 ques where i need to rank according to throughput ratio and got my answer wrong.
First question: they have divided by conversion costs on the basis that they are incurred on an hourly basis. However this is still strictly not valid.
Second question: the ranking will stay the same whether it is on return per factory hour or on TPAR (because the TPAR is the return per factory hour divided by the cost per factory hour, and the cost per factory hour is the same for all products).
It will help you to watch the free lecture on throughput accounting.
thank u sir 🙂
sir , is it always bottleneck resources is machine hours? can’t it be number of units? if bottleneck is number of units, should we calculate TPAR by ”fixed cost/limited number of units or fixed cost/machine hours’
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The bottleneck will be a machine and will be limited by the number of hours available on the machine.
Sir,
The part 2 of the throughput accounting article in the student accountant hub states that bottlenecks should first be exploited (step 2) and then elevated (step 4). I don’t understand the difference. Can you please explain it to me.What it means is that we should try and stop the bottleneck process from being a bottleneck (maybe by speeding up the process). However, that will then mean that another process becomes the bottleneck and then that one needs investigating.
please help me in this question
alpha is expected to be operational for 8 hrs per day and can produce 1200 units of X per hour, 1500 of Y units per hour and 600 units of Z per hour
operating costs=720000
throughput per unit:
x=70
y=90
z=200
in book, throughput per hour is calculated as:
x=70*1200
y=90*1500
z=200*600
i did not understand how this is calculated.to calculate throughput per factory hour formula is :
throughput per unit/factory cost per unit of bottleneck resource. in ques, factory hour per unit is not given.. so how could we calculate return per factory hour?You can calculate the hours per unit!!
If they can produce 1200 units of X in 1 hour, then the time for each unit is 1/1200 hours.
So the throughput per hour for X is 70 / (1/1200) which is the same as 70 x 1200
The same for Y and Z.
1. IDENTIFY the system’s constraint(s).
2. Decide how to EXPLOIT the system’s constraint(s).
3. SUBORDINATE everything else to the above decision.
4. ELEVATE the system’s constraint(s).
5. If in the previous steps a constraint has been broken, go back to step 1, but do not allow INERTIA to cause a system’s constraint.Sir,
What does the fifth step mean? I don’t understand the term ‘inertia’. Can you please clarify it for me.Thank you, Sir!! I really thought that it was something too deep and too hard to understand.
Hi john sir..in the second thread above..there is also opening inventory of material for$ 7250..we did’t consider it while calculating tpar ratio..we only cosidered material purchased for $13000..why john sir? When we calculate throughput we should deduct material consumed from sales revenue..but here only material purchased is deducted
It is actually a very poor question (and there would not be opening inventory like that in the exam).
Throughput accounting assumes that minimal inventories are kept, and that is what makes the materials purchases variable. If there were high inventories kept then the purchases would not be variable in the same way because buying more or less than is used would simply change the inventory. Throughput assumes that the materials purchases varies directly with the sales in each period.
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