ACCA Performance Management (F5) Certification Practice Exam

Why is the cost per factory hour important in throughput analysis?

1. It allows for comparison between different factories

2. It helps determine the price per unit

3. It assesses the efficiency of resource utilization

4. It measures consumer demand

The correct answer is: It assesses the efficiency of resource utilization

The criticality of cost per factory hour in throughput analysis lies in its capacity to assess the efficiency of resource utilization. Throughput analysis primarily focuses on maximizing the output of goods or services while minimizing costs associated with production. By evaluating the cost incurred for each hour spent in the factory, organizations can identify how effectively their resources, such as labor and machinery, are being utilized. Understanding this metric helps managers pinpoint inefficiencies in the production process and makes it easier to implement strategies aimed at increasing throughput. For instance, if the cost per factory hour is high, it may indicate excessive overtime labor costs, machinery idle time, or prolonged production cycles. Addressing these issues could lead to significant improvements in overall productivity. In contrast, while other options touch upon relevant aspects of factory operations, they do not specifically convey the essence of throughput analysis. For instance, comparing factories can be informative but is not the primary focus of throughput analysis itself. Similarly, determining the price per unit relates more to pricing strategies than efficiency assessment. Lastly, measuring consumer demand is more associated with market analysis rather than the internal efficiency and cost management that throughput analysis emphasizes.