ExpertMedium2 marksMultiple Choice
Specialist cost and management accounting techniquesThroughput AccountingSpecialist CostingSection A
ACCA · Question 05 · Specialist cost and management accounting techniques
Section A
Titan Heavy Industries manufactures industrial cranes. The factory operates a bottleneck process in the welding department.
For Product X, the selling price is $5,000 and the direct material cost is $2,000. It takes 10 hours of welding time to produce one unit of Product X.
The total factory costs (excluding direct materials) are $1,200,000 per month, and the total available welding hours are 5,000 hours per month.
What is the Throughput Accounting Ratio (TPAR) for Product X?
Section A
Titan Heavy Industries manufactures industrial cranes. The factory operates a bottleneck process in the welding department.
For Product X, the selling price is $5,000 and the direct material cost is $2,000. It takes 10 hours of welding time to produce one unit of Product X.
The total factory costs (excluding direct materials) are $1,200,000 per month, and the total available welding hours are 5,000 hours per month.
What is the Throughput Accounting Ratio (TPAR) for Product X?
Answer options:
A.
0.80
B.
1.25
C.
1.50
D.
2.08
How to approach this question
1. Calculate Throughput per unit (Selling Price - Material Cost).
2. Calculate Return per factory hour (Throughput / Bottleneck hours per unit).
3. Calculate Cost per factory hour (Total factory costs / Total bottleneck hours).
4. TPAR = Return per factory hour / Cost per factory hour.
Full Answer
B.1.25✓ Correct
Throughput per unit = $5,000 - $2,000 = $3,000.
Return per factory hour = $3,000 / 10 hours = $300 per hour.
Cost per factory hour = $1,200,000 / 5,000 hours = $240 per hour.
TPAR = $300 / $240 = 1.25.
Common mistakes
Dividing factory cost by return (getting 0.80) or including labor in the throughput calculation.
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