Throughput Accounting - TPAR

Throughput Accounting

Calc. of TPAR

Steps:

1. Throughput = S.P – Material cost

2. Throughput/ Bottleneck Hour = Throughput per unit

                                                                    Hours in bottleneck per unit (Hrs per unit)

3. COST per Bottleneck Hour = Total conversion cost

                                                 Tot. time available on bottleneck resource (Tot. Hours)

Total Conversion cost includes ALL THE PRODUCTION COST except the Direct Material COST

i.e. Tot Conv. Cost = Dir. Labour + Dir. Expenses + Indirect (Material, Labour and Expenses)

Conversion costs are the sum of direct labor and manufacturing overheads.

Conversion Costs = Direct Labor + Manufacturing Overheads

Since total manufacturing costs has three components: direct material, direct labor and manufacturing overheads, conversion costs may also be calculated using the following formula:

Conversion Costs = Total Manufacturing Costs – Direct Material

4. TPAR =  2/3

Egsample question:

Calculation of TPAR (Excel Screenshots)