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2 important formula in Throughput Accounting

(a)  Return per factory hour= (Sales −direct material costs )/Usage of bottleneck in hours (factory hours)

 This enables businesses to take short-term decisions when a resource is in scarce supply.


(b)  Throughput accounting ratio   (TAR)= Return per factory hour/Cost per factory hour


Factory hours are measured in terms of use of the bottleneck resource. Organizations should try to maximize the throughput accounting ratio by making process improvements or product specification changes.

This measure has the advantage of including the costs involved in running the factory. The higher the ratio, the more profitable the company. If a product has a ratio of less than one, the organization loses money every time it is made.
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