ICMA Pakistan MANAGEMENT ACCOUNTING

ThroUGhPUT ACCoUNTING
CBQ#1A CIMA ‘P2’ -- Kaplan Publishing
The following data relates to three products manufactured by BJS Ltd:
PRODUCT X Y Z
Selling price per unit ($) 12 16 14
Direct Material cost per unit 3 10 7
Maximum demand (units) 15,000 40,000 20,000
Time required on the bottleneck
(hours per unit) 3 1.5 7
The firm has 80,000 bottleneck hours available each period.
Total factory costs amount to $100,000 in the period.

REQUIRED:
a. Calculate the optimum product mix and the maximum profit.
b. Calculate the throughput accounting ratio for each product.

CBQ#1B Adapted from ICMA November 2018

CBQ#1C Adapted from COLLING DRURY (Modified)

(a) Flopro plc make and sell two products A and B, each of which passes through the same automated
production operations. The following estimated information is available for period 1:
(i) Product unit data: A B
Direct material cost (£) 2 40
variable production overhead cost (£) 28 4
Overall hours per product unit (hours) 0.25 0.15
(ii) Production/sales of products A and B are 120,000 units and 45,000 units respectively. The selling prices
per unit for A and B are £60 and £70 respectively.
(iii) Maximum demand for each product is 20% above the estimated sales levels.
(iv) Total fixed production overhead cost is £1,470,000. This is absorbed by products A and B at an average
rate per hour based on the estimated production levels.

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ICMA Pakistan MANAGEMENT ACCOUNTING
One of the production operations has a maximum capacity of 3075 hours which has been identified as a
bottleneck which limits the overall production / sales of products A and B. The bottleneck hours required
per product unit for products A and B are 0.02 and 0.015 respectively.
Required:
Calculate the mix (units) of A and B which will maximize net profit and the value (£) of the maximum net profit.

CBQ#1D CIMA ‘P1’ -- BPP Publishing

Each unit of product ‘B’ requires 4 machine hours. Machine time is the bottleneck resource, there being 650
machine hours available per week. B is sold for $120 per unit and has a direct material cost of $35 per unit.
Total factory costs are $13,000 per week.
REQUIRED: Calculate the return per factory hour and the TA ratio for product ‘B’.

CBQ#1E Adapted from ICMA August 2018

CBQ#2A CIMA ‘P1’ -- BPP Publishing

A company produces three products using three different machines. The following data is available for the latest
period.
Product ‘L’ Product ‘M’ Product ‘N’
(Hours per unit)
Machine Hours required:
Mixing machine 2 5 3
Cutting machine 3 4 2
Finishing machine 1 2 2
Sales demand (Units) 2,700 1,200 2,500
Maximum capacity is as follows:
Hours available
Mixing machine 22,000
Cutting machine 15,400
Finishing machine 7,300
REQUIRED:
A. Identify which of the machine is the bottleneck resource.
B. Calculate the machine utilization rate for each machine.

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ICMA Pakistan MANAGEMENT ACCOUNTING
CBQ#2B CIMA ‘P1’ -- BPP Publishing
The following data relate to the single product made by Squirrel Ltd:
Selling price per unit $16
Direct Material cost per unit $10
Maximum demand (units) per period 40,000
Time required (hours) in process X, per unit 1
Time required (hours) in process Y, per unit 1.5
The capacities are 35,000 hours in process X and 42,000 hours in process Y.
The total factory costs are $105,000 in the period.

REQUIRED:
a. Identify the process bottleneck.
b. Calculate the throughput accounting (T/A) ratio .

CBQ#2C Adapted from ICMA August 2016

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ICMA Pakistan MANAGEMENT ACCOUNTING

CBQ#2D Adapted from ICMA February 2018

Any mix of output can be sold at the above prices and there is unlimited demand for each of the products.
The machine time needed to make one unit of the products is:

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ICMA Pakistan MANAGEMENT ACCOUNTING

CBQ#2E ICMAP EXTRA ATTEMPT, NOVEMBER 2013

Vision International manufactures two products, the LED and the LCD. They pass through three
processes; Proces-1 Proces-2 Proces-3. There are 24 hours of time available per day for all
processes. Information relating to these products is as follows:
Rs./ Unit
LED LCD
Selling price 50,000 40,000
Direct materials 35,000 30,000
Direct labour 2,500 5,000
Maximum demand per day (units) 15 20
Time required per unit (hours):
Proces-1 0.60 0.70
Proces-2 1.00 0.50
Proces-3 0.50 0.80
Additional Data: Rs./ Day
Labour cost 135,000
Variable overhead 60,000
Fixed cost 45,000
Required:
(i) Identify bottleneck process. 02
(ii) Calculate unit contribution per scarce source under throughput accounting. 02
(iii) Rank these products. 01
(iv) Calculate optimum production plan. 02
(v) Calculate throughput accounting (TA) ratio for each product. 03

CBQ#3A CIMA ‘P1’ -- BPP Publishing

Corrie produces three products X, Y, and Z. The capacity of Corrie’s plant is restricted by process Alpha. Process
Alpha is expected to be operational for 8 hours per day and can produce 1,200 units of X per hour, 1,500 units of
Y per hour, and 600 units of Z per hour.
Selling prices and material cost for each product are as follows:
Product Selling Price Material cost Throughput contribution
$ per unit $ per unit $ per unit
X 150 70 80
Y 120 40 80
Z 300 100 200
Conversions costs are $720,000 per day.

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ICMA Pakistan MANAGEMENT ACCOUNTING
Requirements:
a) Calculate the profit per day if daily output achieved is 6,000 units of X, 4,500 units of Y, and
1,200 units of ‘Z’.
b) Determine the efficiency of the bottleneck process given the output in (a)
c) Calculate the TA ratio for each product.
d) In the absence of demand restriction for the three products, advice Corrie’s management on the
optimal production plan.

CBQ#3B Adapted from ICMA September 2017

CBQ#3C Adapted from ICMA August 2014

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ICMA Pakistan MANAGEMENT ACCOUNTING

CBQ#4A CIMA P2-- Kaplan Publishing

Demand for a product made by P Ltd is 500 units per week. The product is made in three consecutive
processes—A, B, and C. Process capacities are:
Process A B C
Capacity per week 400 300 250

The long- run benefit to P ltd of increasing sales of its product is a present value of $25,000 per additional unit
sold per week. Investigations have revealed the following possibilities:

1. Invest in a new machine for process A, which will increase its capacity to 550 units per week. This will
cost $1 million.
2. Replace the machine in process B with an upgraded machine, costing $1.5 million. This will double the
capacity of process B.
3. Buy an additional machine for process C, costing $2 million. This will increase capacity in C by 300 units
per week.

CBQ#4B ICMAP PA Spring 2012

A company produces wide range of products. One of its products ‘Z’ passed through three different processes.
The through put per hour of the process 1,2 and 3 is 24, 20 and 30 units respectively. The company works for 8
hours daily, 6 days per week and 48 weeks in a year. The selling price of the product ‘Z’ is Rs.300 per units and its
material cost is Rs. 60 per unit. Weekly conversion costs are estimated to be Rs. 48,000.
Required:
i) Throughput Accounting (TA) ratio per day.
ii) How much the company could spend on equipment to improve the throughput of process 2, if it wished
to recover its costs in two different time periods of 2 years and 12 weeks respectively?
iii) Revised TA ratio, if money is spent as worked out in (ii) above.

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