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In question 1.7 of bpp revision kit Dec 2014-june2015 the target profit is 25% on cost how is this calculated as 20% of sales price ? And in question 1.9 even if machine X can produce units even with its old condition shouldn’t we also include them in our calculation ??
If the profit is 25% of cost, then for every $100 cost the profit would be $25 and therefore the selling price will be $125.
Or, putting it the other way round, for every $125 selling price, the profit will be $25.In percentage terms, the profit as a percent of selling price is 25/125 = 20%.
With regard to question 1.9, the throughput accounting ratio is calculated for the bottleneck resource (i.e. which process/machine it is that is slowing down production)
Machine X is capable for producing 40 – 15% = 34 units a week, whereas machine Z is only capable or producing 30 units a week.
So….the maximum that we can produce each week is 30.(One thing that the question does not make clear and should (and will be made clear in the exam) is that the trolleys need to be worked on by both of the machines. Maybe they are worked on by machine X first, and then are passed to machine Z to have more work done on them. So……since Z can only work on 30 units, it means X is forced to go slower (there is no point in them making 34 units a week if they all get then stuck waiting for machine Z)
Z is therefore the bottleneck (the slowest machine) and we calculate the ratio based on the bottleneck resource.
In question 3.10 of the same kit , the products are being ranked according to the TPAR where as in Kaplan’s book it says to rank according to throughput per unit of the bottleneck resource , the ranking differs in my calculation when using the different approach so what’s the accurate way of ranking it ?
Both will give the same ranking (you must have made a mistake somewhere).
The TPAR is the throughput per hour (return per factory hour) divided by the cost per factory hour.
Since the cost per factory hour is the same for all products, the one with the higher throughput per hour (return per factory hour) will automatically also be the one with the highest Throughput accounting ratio.
can you please look at my working and tell me where i am going wrong ? https://tmblr.co/Zs4tDq1SlHZ6o
Your answer is correct, and BPP’s answer is wrong.
When calculating the TPAR they have using a different factory cost per hour for each product, which is ridiculous and wrong. They should use the same factory cost per hour throughout (total factory cost divided by the hours available (750)). It is impossible to calculate the total factory cost from the information that is given.
However, the TPAR is not asked for and so we don’t need the factory cost per hour – ranking on the basis of the return per factory hour (throughput per hour) gives the answer.
Again, your answer is correct – BPP have made a rather big mistake!
In bpp kit mock 1 Q2 what is the logic behind throughput per hour calculation in the answer ?
If they can produce 1200 units of X per hour, and if each unit gives throughput of $80, then the throughput per hour for X is 1200 x 80 = $96,000.
If you prefer, the alternative is to say that each unit takes 1/1200 hours.
So throughput per hour = 90 / (1/1200) which comes to the same thing 🙂BPP’s answer is wrong (although the TA ratios are correct.
Throughput per hour for X should be 96000; TAR = 96000/90000 = 1.07
Throughput per hour for Y should be 80 x 1500 = 120,000.; TAR = 120000/90000 = 1.33
Throughput per hour for Z should be 200 x 600 = 120,000; TAR = 120000/90000 = 1.33.
(Both BPP and Kaplan have many mistakes this time 🙁 )
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Hie john regarding the same question BPP 3.10, then the answer for the ranking based Throughput per hour should be
A 90 B 55 D 45 and C 30 . Is that right?
So glad I read through this forum was confused with solutions.
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