Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Throughput accounting ratio question

- This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.

- AuthorPosts
- February 2, 2023 at 5:49 am #677877
The question is :

A company can produce a wide variety of products but its production plans are limited by the time available on Machine M. The budgeted time available for the next period for Machine M is 12,000 hours. The overheads for the next period are budgeted to be $216,000. The company is reviewing the production plans for Product X. The product sells for $8 per unit and incurs material costs of $2 per unit and labour costs of $4 per unit. Each unit of Product X is worked on by Machine M for 10 minutes.Calculate the throughput accounting ratio for Product X to 3 decimal places.

And answer is = 0·857

I have worked it out using the below formula :

(Return per bottleneck minute) / (Cost per bottleneck minute)

Contribution / unit = 8-2= 6

Machine M 10 mins

Contribution / min =6/10 = 0.6 $ / minFactory costs / min = 216000/12000/60 – 0.3 $ / min

TPAR = 0.6/0.3 = 2

I think my mistake is that I assumed that M is the bottleneck.

Since the bottleneck was not mentioned, did I have to use the other formula , where:

TPAR = (Selling Price-Material) / (Labour +O’head) ?Thanks !

February 2, 2023 at 8:56 am #677936M is the bottleneck.

However the cost per factory hour is the total of all costs other than the material, and so is the total of the overheads and the labour.

The overheads per hour are 216,000/12,000 = $18. The labour cost per hour is 4 x 60/10 = $24. Therefore the total cost per factory hour is 18 + 24 = $42.

The return per factory hour is (8 – 2) x 60/10 = $36.

Therefore the TPAR = 36/42 = 0.857

Have you watched my free lectures on throughput accounting?

February 2, 2023 at 9:20 am #677940Thank you for your explanation.

I did not include the labour costs and worked in minutes instead of hours.

Factory costs / min = 216000/12000/60 – 0.3 $ / min + (4/10) – 0.4 $ / min

TPAR = 0.6/0.7 = 0.857

Like this I get the correct answer.

February 2, 2023 at 5:16 pm #678179You are welcome 🙂

(It will obviously always give the same answer whether done in minutes or in hours)

- AuthorPosts

- You must be logged in to reply to this topic.