ACCA Performance Management (F5) Certification Practice Exam

What does the throughput accounting ratio (TPAR) measure?

1. Cost per unit produced

2. Return per factory hour over cost per factory hour

3. Overall factory efficiency

4. Total revenue generated

The correct answer is: Return per factory hour over cost per factory hour

The throughput accounting ratio (TPAR) is specifically designed to evaluate the efficiency of a production process in terms of its profitability relative to its operational costs. It measures the return generated per factory hour in relation to the costs incurred per factory hour. This means it focuses on how much profit is produced for each hour of factory resource used, thereby providing insight into the effectiveness of resource utilization in generating profits. By assessing the return per factory hour over cost per factory hour, TPAR helps businesses optimize their processes and make informed decisions about which products or processes to prioritize for maximum profitability. This approach aligns closely with the principles of throughput accounting, which emphasizes maximizing throughput (the rate of production) while managing operating expenses and inventory. In contrast, other options such as cost per unit produced, overall factory efficiency, and total revenue generated do not capture the specific relationship between the profit generated and the costs incurred over time in the way that TPAR does. These metrics may provide valuable information but do not reflect the core focus of throughput accounting, which is rooted in combining output with cost efficiency to enhance profitability analysis.