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Dear tutor, could you please help me with the solution of this example
Justin Thyme manufactures four products, A, B, C and D. Details of sales prices, costs and resource requirements for each of the products are as follows.
https://dl.groovygecko.net/anon.groovy/clients/kaplan/AlexILS/ACCAWIKI/ACCA_F5_HTML/Images/F5_CH1_img029.gifMachine time is a bottleneck resource and the maximum capacity is400 machine hours each week. Operating costs, including direct labourcosts, are $5,440 each week. Direct labour costs are $12 per hour, anddirect labour workers are paid for a 38-hour week, with no overtime.
(a)Determine the quantities of each productthat should be manufactured and sold each week to maximise profit andcalculate the weekly profit.
(b)Calculate the throughput accounting ratio at this profit-maximising level of output and sales.
Have you watched my lecture on throughput accounting on this website?
I ask because this is actually a very easy example.First calculate the return per factory hour for each product. So for product A, it is (1.40 – 0.60) / (5/60).
When you have calculated the return per factory hour for each product, you rank them on that basis (the best is the one with the highest return per factory hour and so on).
Then you decide on the production – produce the one with the highest return per factory hour first, but there is a limit on the amount (because of the limit on demand) so then move to the next best, and so on until you have used all of the limited time.
You should then find it easy to calculate the total profit and the TPAR.
Thank you very much for the help.
Actually I was confused with the minutes and wasn’t sure it has to be calculated like that.
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