ExpertHard2 marksMultiple Choice
ACCA · Question 19 · Cost accounting techniques
A factory uses throughput accounting. Product X sells for $120. Material costs are $40 per unit. The bottleneck resource is machine time, and Product X takes 2 hours on the bottleneck machine. Total factory costs (excluding materials) are $100,000 per week, and the bottleneck machine is available for 4,000 hours per week.
What is the Throughput Accounting Ratio (TPAR) for Product X?
A factory uses throughput accounting. Product X sells for $120. Material costs are $40 per unit. The bottleneck resource is machine time, and Product X takes 2 hours on the bottleneck machine. Total factory costs (excluding materials) are $100,000 per week, and the bottleneck machine is available for 4,000 hours per week.
What is the Throughput Accounting Ratio (TPAR) for Product X?
Answer options:
A.
0.8
B.
1.2
C.
1.6
D.
2.0
How to approach this question
1. Calculate throughput per unit (Sales - Materials). 2. Calculate return per bottleneck hour (Throughput / Hours per unit). 3. Calculate factory cost per bottleneck hour (Total factory costs / Total bottleneck hours). 4. TPAR = Return per hour / Cost per hour.
Full Answer
C.1.6✓ Correct
Throughput = $120 - $40 = $80.
Return per bottleneck hour = $80 / 2 hours = $40/hour.
Factory cost per bottleneck hour = $100,000 / 4,000 hours = $25/hour.
TPAR = $40 / $25 = 1.6.
Common mistakes
Deducting labor costs to find throughput. In throughput accounting, only materials are considered truly variable.
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