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Throughput Accounting Ratio

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Throughput Accounting Ratio

  • This topic has 3 replies, 2 voices, and was last updated 6 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • December 2, 2018 at 3:12 am #486734
    hasani1996
    Member
    • Topics: 6
    • Replies: 8
    • ☆

    Hi
    Can you please explain the following question to me?

    ABC Company uses throughput accounting. Machine time is the current binding constraint on production output and the management are looking for ways to increase the throughput accounting (TA) ratio for a product that the machine is used to manufacture.

    Which of the following will have no effect on the TA ration?

    a. increasing the selling price of the product
    b. obtaining a lower purchase price for materials for the product
    c. reducing factory costs
    d. reducing the machine time per unit to make the product

    The answer is d.
    The answer states that reducing the machine time per unit will increase throughput per hour and factory costs per hour by the same proportion, leaving the TA ratio unchanged.

    But I do not understand how the factory cost per hour gets reduced when the machine time per unit is reduced.

    Please explain.
    Thank you very much!

    December 2, 2018 at 9:26 am #486749
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54671
    • ☆☆☆☆☆

    I am guessing that you found this question i the BPP Revision Kit.

    The answer is wrong – reducing machine time per unit will not change the factory cost per hour.

    January 9, 2019 at 5:55 pm #500501
    hasani1996
    Member
    • Topics: 6
    • Replies: 8
    • ☆

    Yes I did find it in the BPP Revision Kit.
    Oh right! Thank you very much!

    January 10, 2019 at 8:05 am #500549
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54671
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘Throughput Accounting Ratio’ is closed to new replies.

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