- 9 Marks
Question
The statement below relates to the costs and selling price of a unit of three products produced by a company:
Additional information provided:
Labour rate per hour for all the products is GH¢8
Demand for the year in units: A – 4,000; B – 2,500; C – 3,600
Available labour hours: 65,000
Required:
i) Prepare a production plan that will maximize profit using the throughput approach.
(9 marks)
ii) Calculate the Through Put Accounting Ratio for each product assuming that the conversion
cost is based on the annual demand.
(6 marks)
Answer
a)
Allocation of Limited Resources:
B: 2,500 units × 5 hours = 12,500 hours
C: 3,600 units × 11.25 hours = 40,500 hours
A: Remaining hours = 65,000 – (12,500 + 40,500) = 12,000 hours
Units of A to be produced: 12,000 hours ÷ 6.75 hours/unit = 1,778 units
Optimal Production Plan:
Product Units Produced
A 1,778 units(0.5)
B 2,500 units(0.5)
C 3,600 units(0.5)
iii) Total Conversion Cost
Conversion cost per limited resources =
GH¢ 1,037,000/65,000 GH¢ 15.96
- Topic: Throughput Accounting
- Series: MAR 2023
- Uploader: Cheoli