2) The Modern Business Environment

Question 1

Throughput accounting ratio - Calculate

Answer 1

= Return per factory hour / Cost per factory hour

Question 2

Return per factory hour (Throughput accounting) - Calculate

Answer 2

= Throughput contribution / Product’s time on bottleneck resource

Question 3

Define Throughput Contribution

Answer 3

= Selling price (revenue) - Direct material cost

Question 4

Rank in what order products should be produced and calculate number of units of each product needed to maximise throughput

Answer 4

Calculate “Return per factory hour” for each product, rank highest to lowest, produce enough to satisfy maximum demand for each product in order until bottleneck resource is used up. Balancing figure units for last product that exceeds bottleneck resource.

Question 5

Cost per factory hour - Calculate

Answer 5

= total factory cost / total time on bottleneck resource