Page 49 - P1 Integrated Workbook STUDENT 2018
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Other elements of cost accounting systems
2.4 Throughput accounting performance measures
Management actions and decision making can be assessed by focusing on changes
in some key performance measures used in throughput accounting:
Throughput contribution
Return per factory hour –––––––––––––––––––––––––––––––
Time taken on the bottleneck resource
This tells us how much return is generated by each
product at the bottleneck point. Management should
strive to maximise this return (which should then
lead to an increase in the organisation’s profits).
Total factory cost
Cost per factory hour –––––––––––––––––––––––––––––––––––
Total time taken on the bottleneck resource
Management should aim to minimise this cost
(which includes all other costs that are not used in
the calculation of throughput contribution).
Return per factory hour
Throughput accounting ratio –––––––––––––––––––
(TAR) Cost per factory hour
Management should aim to maximise this measure.
Typically, only products with a TAR of greater than 1
(i.e. where the return per hour is greater than the
cost per hour) should be produced.
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