Hi John,
Please may i have your assistance with the below:
Corrie produces three products X Y and Z. The capacity of Corrie’s plant is restricted by process alpha. process alpha is expected to be operational for eight hours per day and can produce 1200 units of x per hour, 1500 units of y per hour and 600 units of z per hour.
Throughput per unit:
x 80
y 80
z 200
Conversion costs are 720,000 per day
A change in factory cost arose, giving a new figure for conversion costs per factory hour of 80,000.
Calculate the revised TA ratio for each product.
As I am aware from your lectures - TA ratio = return per factory hr/cost per factory hr.
RPFH = TP/time taken in b'neck
Which would be for X:
RPFH = 80/0.05 = 1,600
CPFH = 80,000 (as stated in Q)
TPAR=1600/80,000 = 0.02.
I understand that this would not ever be correct but see below answer.
TPAR for X:
$80x(60/0.05mins)= $96,000/80,0000 1.2
Why is this being calculated this way? I am confused.
Thanks in advance for your help.
J
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Throughput Accounting
5y ago#1I don't know how you got 0.05 in your calculation of the return per factory hour.
They are producing 1,200 units of X per hour, and therefore the time per unit is 1/1,200 hours.
Therefore the return per factory hour for X is 80 / (1/1,200) = $96,000.
I got the 0.05 by calculating - 60mins/1200units.
5y ago#3But it is the return per hour that we need, not the return per minute.
Hi
I need your help , i can't understand when i should use TAR or TA ?
Exactialy i don't understand this pharses:
When ranking products made within the same factory it is sufficient to look at their respective return per hour figures.
However, if ranking products or divisions across the company it would be suitable to look at TPAR figures reflect differences in costs between factories.
With the best regards.
5y ago#5We would only ever be using throughput accounting to rank products made within the same process.
The ranking is the same whether we use the TPAR or the throughput return. The TPAR is relevant in that we want it to be greater than 1 as I explain in my free lectures.
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