Question 1

**Section A**

BioGenetics uses Throughput Accounting. For Product X, the selling price is $120, and the totally variable material cost is $40. The product spends 2 hours on the bottleneck machine. Total factory costs are $500,000, and total bottleneck hours available are 10,000.

Calculate the Throughput Accounting Ratio (TPAR) for Product X. (Enter your answer to one decimal place).

Accepted Answer

1. Calculate Throughput per unit: Selling Price - Material Cost. 2. Calculate Throughput per bottleneck hour: Throughput per unit / hours on bottleneck. 3. Calculate Factory cost per bottleneck hour: Total factory costs / Total bottleneck hours. 4. Calculate TPAR: Throughput per bottleneck hour / Factory cost per bottleneck hour.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Calculating throughput as Selling Price - Total Variable Costs (including labor), which is incorrect in Throughput Accounting where only materials are considered totally variable.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA PM — Performance Management Practice Exam 2

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