ACCA PM · Chapter 4 · Question 2 of 10
Rho Co makes product P, which sells for $50 per unit and uses $20 of direct materials per unit. Each unit needs 0.5 hours on the bottleneck machine. Total factory costs (all labour and overheads) are $600,000 per year and 25,000 bottleneck hours are available per year. What is the throughput accounting ratio (TPAR) for product P?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) 2.50
Explanation
Return per factory hour = ($50 - $20) / 0.5 = $60. Cost per factory hour = $600,000 / 25,000 = $24. TPAR = $60 / $24 = 2.50. A TPAR above 1 means the product generates more throughput than it costs to run the factory for the time it uses.
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