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Help i cant solve this question
CD co produces a single product, BC which passess through three different processes, Alpha, Beta and Gamma. The throughput per hour of three processes is 25,30,32 units of BC respectively. The organisation operates for ten hours a day, 5 days a week for 50 weeks of the year. The BC can be sold for $420 per unit and it has a materical cost of $170 per unit. It is anticipated that annual conversion costs will be $1,800,000. What is TPAR?
Answer: 8.68The throughput is 420 – 170 = 250.
The bottleneck resource is Alpha, and so the throughput return per hour is 250 x 25 = $6,250.
The cost per factory hour is 1,800,000 / (10 x 5 x 50) = $720.
Therefore the TPAR = 6,250/720 = 8.68
Note:
The bottleneck resource can always be easily spotted without having to perform any calculation just by identifying that process with the lowest capacity (if you’re given a question where the production capacities of all processes are in units) or by identifying that process with the slowest time (if given a question where the processing times for all production processes are in hours)
Hi John, the throughput is $250 not 250 units (since selling price and direct material cost are in $ terms) just for clarity purposes
Hi John, in your solution provided, why is the TPAR only computed for the bottle neck resource (Alpha), but not for Beta & Gamma as well? Thanks.
Hi John, why is the TPAR computed only using info for the bottle neck (Alpha), but not for the other two processes? Need to know urgently..Thanks
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