Q1.

N Co produces a single product, the N98, which passes through three different processes,
sawing, hammering and drilling. The throughput per hour of the three processes is 178 units,
156 units and 139 units of N98 respectively. The organisation operates for seven hours a day,
six days a week for 52 weeks of the year. The N98 can be sold for $32 per unit and it has a
material cost of $12 per unit. Annual conversion costs are budgeted at $1,600,000.
How much could N Co spend on improving the throughput of the current bottleneck
process if it wished to recover its costs in one year?
A. None of the above.
B. $1,188,096.
C. $1,703,520.
D. $14,280.

The correct answer is: None of the above.

Throughput contribution per unit = $(32 - 12) = $20
The drilling process is the bottleneck.
Annual throughput (units)
Sawing 178 x 7 x 6 x 52 = 388,752
Hammering 156 x 7 x 6 x 52 = 340,704
= 303,576
Drilling 139 x 7 x 6 x 52
( smallest)
Annual throughput could be increased by (340,704 - 303,576) units = 37,128 units if the throughput of drilling was increased to
that of hammering.
This would increase contribution by 37,128 x $20 = $742,560, the amount which could be spent on improvements.
If you answered$1,703,520: It is based on the throughput of drilling increasing to that of sawing.
If you answered $1,188,096: It is based on revenue rather than contribution.
If you answered $14,280: Itis the possible expenditure if costs have to be recovered in a week.

Q2. In throughput accounting, inventory is valued at:

A. Target cost.
B. Total absorption cost.
C. Material cost.
D. Marginal cost.
Q3. Which of the following are particular problems of JIT?
A. There is a risk that inventories may become obsolete.
B. It is not always easy to predict patterns of demand
C. JIT makes the organisation far more vulnerable to disruptions in the supply chain.
D. Wide geographical spread makes JIT difficult.
Q4.
If a producer is keen to implement a JIT operating system, then:
A. The fixed costs of placing an order and receiving inventory must be small[
 B. The variable costs of placing an order and receiving inventory must be high
C. The fixed costs of placing an order and receiving inventory must be high.
D. The variable costs of placing an order and receiving inventory must be small.
Q5. The following data refers to a soft drinks manufacturing company that passes its product
through four processes and is currently operating at optimal capacity.
Process Washing Filling Capping Labelling
Time per dozen units 6 mins 3 mins 1.5 mins 2 mins
Machine hours available 1,200 700 250 450
Product data
$ per unit
Selling price 0.60
Direct material 0.18
Direct labour 0.02
Factory fixed cost $4,120
Which process is the bottle neck
A. Washing.
B. Labelling.
C. Capping.
D. Filling.
Q6. Which three of the following costs are likely to rise when Just In Time manufacturing
is introduced?
A. Set-up costs
B. Raw material storage costs
C. Opportunity cost of lost production due to reorganisation of labour and machinery for
different products
D. Customer order costs.
E. Raw material handling costs.
Q7. JH Co produces three products, the Li, the L2 and the 13. The LI has a TA ratio of 1.4, the
12 a ratio & 1.8, the 13 a ratio of 1.0. Which of the following statements is/are true?
i. L1 should be produced before L2.
ii. L3 should be produced before L1.
iii. L3 should not be produced at all
iv. Only L3 should be produced.
v. It is impossible to state a preference between the products.
A. Only statement (iv) is true
B. All of the statements are true
 C. None of the statements are true
D. Statements (i) and (ii) are true
Q8. LEFM Co operates a throughput accounting system. One of its products, product R, is sold
for $12.50. It has a unit material cost of $2.60 and unit conversion costs of $6.00. Each unit of
product R spends 4.95 minutes on the bottleneck resource.
What is the return per factory hour for product R to the nearest $?
A. $120
B. $2
C. $9.90
D. $47
Q9. What is the throughput accounting ratio of this product?
$ per hour $ per hour
Selling price 50
Production cost
Material 10
Direct labour 15
Other variable costs 4
Fixed conversion costs 6
Total cost 35
Profit 15
A. 0.3
B. 0.625
C. 1.6
D. 3.5
The throughput accounting ratio of the product is
= (sales - material cost) per time period / (labour + overhead) per time period
= (50 - 10)/(15 + 4 + 6) = 40/25 = 1.6

Q10.
Which three of the following contribute to successful JlT?
A. Minimal set-up time and costs.
B. Nonperishable finished goods.
C. Close relationship with suppliers
D. Nonperishable raw materials
E. Uniform loading of all stages of the production process.
Q11. CD Co produces a single product, the BC, which passes through three different
processes. Alpha, Beta and Gamma The throughput per hour of the three processes is 25, 30
and 32 units of BC respectively. The organisation operates for ten hours a day, 5 days a week
for 50 weeks of the year. The BC can be sold for $420 per unit and it has a material cost of
$170 per unit It is anticipated that annual conversion costs will be $1,800,000
What is the throughput accounting ratio per day?
A. 8.68
B. 0.03
C. 14.58
D. 11.11
Q12.
A company manufactures two products which requires three different machine processes:
Processing time per metre in hours
Product A Product B
Pressing 0.50 0.50
Stretching 0.25 0.40
Rolling 0.40 0.25

Each product requires 1 metre of material/unit. Production for the month is expected to be
10,000 metres for Product A and 15,000 for Product B.
Available resources for the month are expected to be:
Available resource
Material
30,000 metres
Pressing time
13,000 hours
Stretching time
8,000 hours
Rolling time
7,750 hours
Using throughput accounting, what is the bottleneck resource?
 Material
 Pressing time
 Stretching time
 Rolling time

Q13.

A company manufactures a product which requires two hours per unit of machine time.
Machine time is a bottleneck resource as there are only five machines which are available for
24 hours per day, five days per week. The product has a selling price of $65 per unit, direct
material costs of $25 per unit, labour costs of $20 per unit and factory overhead costs of
$10 per unit. These costs are based on weekly production and sales of 300 units.
What is the throughput accounting ratio (to 2 decimal places)?
$
Q14.
Z Company uses throughput accounting to help assess the efficiency of its operations.
Which of the following would improve its throughput accounting ratio?
 Introduce restrictions specifying the maximum allowed hours for each shift
 Replace existing material with higher quality material
 Raise the selling price of the product
 Use a higher grade of labour for the work

Q15
X Co uses a throughput accounting system. Details of product A, per unit, are as follows:
Selling price $320
Material costs $80
Conversion costs $60
Time on bottleneck resource 6 minutes
What is the return per hour for product A?
$

Q16.

Which TWO of the following features distinguish throughput accounting from other costing systems?
 It does not attempt to maximise profit.
 Work in progress is valued at material cost only.
 Costs are allocated to products when they are completed or sold.
 Only labour cost is treated as a variable cost.
Q17.
Which of the following is NOT an influence on the throughput contribution measure used in a
system of throughput accounting?
 Direct material price
 Direct material usage
 Direct labour price
 The volume of throughput