Page 47 - P1 Integrated Workbook STUDENT 2018
P. 47
Other elements of cost accounting systems
2.3 Allocating the bottleneck resource to products
In order to achieve the aim of earning the highest throughput for each unit of the
bottleneck resource consumed a 5 step approach is taken.
Step 1: Identify the bottleneck constraint.
Step 2: Calculate the throughput contribution per unit for each product.
Step 3: Calculate the throughput contribution per unit of the bottleneck resource
for each product.
Step 4: Rank the products in order of the throughout contribution per unit of the
bottleneck resource.
Step 5: Allocate resources using this ranking.
Example 3
Cled produces two products with the following information
Standard Ultra
Selling price per unit $80 $120
Direct costs per unit $50 $60
Hours per unit required at the bottleneck
resource 1.00 2.00
Maximum demand 40,000 18,000
40% of direct costs relate to direct materials. There are 50,000 hours available
at the bottleneck.
Total factory costs in the period are $2m.
Calculate the optimum production mix and the maximum gross profit.
43
