A manufacturing company decides which of three mutually exclusive products to make in its factory on the basis of maximising the company’s throughput accounting ratio. Current data for the three products is shown in the following table: Product X Product Y Product Z Selling price per unit $60 $40 $20 Direct material cost per unit $40 $10 $16 Machine hours per unit 10 20 2.5 Total factory costs (excluding direct materials) are $150,000. The company cannot make enough of any of the products to satisfy external demand entirely as machine hours are restricted. Which of the following actions would improve the company’s existing throughput accounting ratio?
A、Increase the selling price of product Z by 10%
B、Increase the selling price of product Y by 10%
C、Reduce the material cost of product Z by 5%
D、Reduce the material cost of product Y by 5%
A、Increase the selling price of product Z by 10%
B、Increase the selling price of product Y by 10%
C、Reduce the material cost of product Z by 5%
D、Reduce the material cost of product Y by 5%
【参考答案及解析】
As all three products are mutually exclusive, the company would choose to make X as it has the highest throughput return per hour of $2. Of the four possible options, only increasing the selling price of product Z by 10% would give a higher throughput return per hour of $2.40.
As all three products are mutually exclusive, the company would choose to make X as it has the highest throughput return per hour of $2. Of the four possible options, only increasing the selling price of product Z by 10% would give a higher throughput return per hour of $2.40.