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Lecture 4
Throughput
Accounting
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Illustration 1
No. Units Sold Per Day
Sales Price
Direct Materials Cost per unit
Other Factory Costs per Day
No. Hours of bottleneck used per day
500
25
10
6000
8
Required
(i) Calculate the Return Per Factory Hour.
(ii) Calculate the Throughput Accounting Ratio.
(iii) Suggest how could the ratio be improved.
Solution
(i)
Working
(500 x 25)
12,500
Direct Materials
(500 x 10)
-5000
7,500
8
(7,500 / 8)
938
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(ii)
Working
Return Per Factory Hour
$
938
(6,000 / 8)
750
(938 / 750)
1.25
(iii)
To improve the throughput accounting ratio a firm may:
Increase the selling price per unit
Reduce material costs per unit if possible
Reduce the time on the bottleneck process
Redesign the bottleneck process
Invest in capacity to increase the bottleneck
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10. State 3 other factors should be considered before ceasing production based on
the THAR.
Customer Perception.
Long term impact on the business.
Lost related sales.
Excess capacity.
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Lecture 5
Environmental
Accounting
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