How is the ratio of throughput per factory hour calculated?

How is the ratio of throughput per factory hour calculated?

• A. Cost per unit / Production time
• B. Throughput per unit / Products time on the bottleneck resource
• C. Total output / Total time
• D. Factory costs / Total factory hours

Answer: (B)

The ratio of throughput per factory hour is calculated using the concept of throughput, which refers to the revenue generated from the units sold minus the variable costs associated with producing those units. Option B specifies that throughput per unit is divided by the time that the product spends on the bottleneck resource. This is critical because the bottleneck resource is the limiting factor in the production process, determining how quickly products can be manufactured. By focusing on the time spent on the bottleneck resource, this calculation provides a clear measure of efficiency. It highlights how effectively factory hours are being utilized to generate throughput, thus allowing management to identify areas for improvement and make more informed decisions on resource allocation and production strategy. The other choices do not accurately capture the essence of throughput per factory hour. Some might misinterpret costs or total output without considering how they relate to the bottleneck, which is crucial for understanding the flow of production and maximizing profitability. By isolating the throughput in relation to the bottleneck, option B gives a precise measure that reflects production efficiency and optimization in the context of limited resources.

The ratio of throughput per factory hour is calculated using the concept of throughput, which refers to the revenue generated from the units sold minus the variable costs associated with producing those units. Option B specifies that throughput per unit is divided by the time that the product spends on the bottleneck resource. This is critical because the bottleneck resource is the limiting factor in the production process, determining how quickly products can be manufactured.

By focusing on the time spent on the bottleneck resource, this calculation provides a clear measure of efficiency. It highlights how effectively factory hours are being utilized to generate throughput, thus allowing management to identify areas for improvement and make more informed decisions on resource allocation and production strategy.

The other choices do not accurately capture the essence of throughput per factory hour. Some might misinterpret costs or total output without considering how they relate to the bottleneck, which is crucial for understanding the flow of production and maximizing profitability. By isolating the throughput in relation to the bottleneck, option B gives a precise measure that reflects production efficiency and optimization in the context of limited resources.