ACCA Applied Skills · Performance Management · Throughput accounting
Marlow Co has a product with a selling price of $90 and material cost of $30 per unit. Each unit needs 0.5 hours on the bottleneck. Total factory cost is $360,000 per period and the bottleneck is available for 6,000 hours per period. What is the cost per factory hour and the return per factory hour?
Cost per factory hour is $60 (360,000 divided by 6,000 hours) and return per factory hour is $120 (throughput of $60 per unit divided by 0.5 hours). The product's TPAR is therefore 2.0.
- A$60 and $120Correct
- B$60 and $60
- C$30 and $120
- D$120 and $60
Explanation
Cost per factory hour = 360,000 / 6,000 = $60. Throughput per unit = 90 - 30 = $60; return per factory hour = 60 / 0.5 = $120. The TPAR is therefore 120 / 60 = 2.0. Using $60 as return forgets to divide by the hours per unit.
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