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Hi, my concern is with question 2 in the mock exam one. My understanding is that throughput accounting ratio is calculated as Return per hour / Cost per hour where Return per hour is calculated as Throughput per unit / bottleneck per unit. In this question (i’ll just use one product) the throughput per X product is $80 and 1200 units can be produced. The operational hours are 8 hours per day.
In the suggested answer for this question, the return per hour for product X is calculated as:
$80 x (60 / 0.05mins) = $96,000Can you please explain how that answer was derived?
I do not have the BPP exam, but I think it probably says that they can produce 1200 units per hour.
Therefore the time per unit is 1/1200 hours.
The return per hour is therefore $80 / (1/1200) = $96,000.
(What the answer has done is first convert it to minutes: 1/1200 hours = 60 / 1200 minutes = 0.05 minutes, which seems a bit silly of them 🙂 )
Also, what you could have done is this: we want the return per hour. We know that each unit gives $80, and we know that in one hour we can make 1,200 units. So at $80 each it means that it one hour we get a return of 1200 units x $80 = $96,000.
I hope that all makes sense 🙂
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