ExpertHard2 marksShort Answer
ACCA · Question 11 · Specialist cost and management accounting techniques
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).
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).
How to approach this question
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.
Full Answer
Throughput per unit = $120 - $40 = $80.
Return per factory hour = $80 / 2 hours = $40 per hour.
Cost per factory hour = $500,000 / 10,000 hours = $50 per hour.
TPAR = $40 / $50 = 0.8.
Common mistakes
Calculating throughput as Selling Price - Total Variable Costs (including labor), which is incorrect in Throughput Accounting where only materials are considered totally variable.
Practice the full ACCA PM — Performance Management Practice Exam 2
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