Medium2 marksMultiple Choice

Specialist Cost and Management Accounting TechniquesTheory of ConstraintsThroughput AccountingSyllabus Area B

This question is part of a case study — click to read the full scenario(Case 16)

Section B - Case 1: AeroBlade Dynamics

AeroBlade Dynamics manufactures heavy wind turbine blades. They produce two models: Standard and Advanced. The factory operates a highly specialized molding machine which is the bottleneck resource. Total bottleneck hours available per month are 3,000 hours. Total factory costs (excluding direct materials) are $120,000 per month.

Data per unit:
Standard Blade: Selling Price = $200, Direct Material Cost = $80, Machine Hours = 2 hours.
Advanced Blade: Selling Price = $350, Direct Material Cost = $150, Machine Hours = 4 hours.

Calculate the Return per Factory Hour for the Advanced Blade. (Enter the number only)

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ACCA · Question 20 · Specialist Cost and Management Accounting Techniques

Section B - Case 1: AeroBlade Dynamics

AeroBlade Dynamics is applying the Theory of Constraints (TOC). They have identified the molding machine as the bottleneck and decided on the product mix that maximizes throughput.

According to the 5 focusing steps of TOC, what is the immediate next step management should take?

Answer options:

Elevate the system's constraint by buying another molding machine.

Identify the system's constraint.

Subordinate everything else to the bottleneck decision.

Exploit the system's constraint.

How to approach this question

Recall the 5 steps of TOC: 1. Identify, 2. Exploit, 3. Subordinate, 4. Elevate, 5. Repeat. The prompt says they identified (1) and decided the mix to maximize throughput (Exploit - 2). The next step is 3.

Full Answer

C.Subordinate everything else to the bottleneck decision.✓ Correct

The 5 steps of TOC are: 1. Identify the constraint. 2. Exploit the constraint (maximize its use, decide product mix). 3. Subordinate everything else to the constraint (pace non-bottlenecks to the bottleneck). 4. Elevate the constraint (buy more capacity). 5. Repeat if the constraint breaks. Since steps 1 and 2 are done, step 3 (Subordinate) is next.

Common mistakes

Jumping straight to 'Elevate' (buying a new machine) before ensuring the current system is fully synchronized (Subordinate).

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Practice the full ACCA PM — Performance Management Practice Exam 5

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