Lec 10 - limiting factor analysis Flashcards
managment accountatns decide and tell podction departments how many ?
units of product they shpuld produce to sell this year
What are the two assumptions in limiting factor analysis
resources are at fixed levels
cost can be accuratley divided into fixed and variable components
what is alimiting factor
reosurces placing constraint on ouptut level
what are we trying to figure out with lmiting factor analysis
with our lmitied resources how much of a product can we make
-optimal amount
what is the optimum outptu schedule
that which maximises contribution and their profits
steps for limiting factor analysis
1
determine contribuion of all opoortunities and eliminate those w a negative contribution
2
establish contribution per unit of lmiting factor
rank by reference to measure which product should take the highest prioirity
3
prioritise production according to ranking in step 2 , produce highest rank till mkt demand is satisfied
apply remiander of limting factor till run out of
why do we calculate contribution per unit for and what does it tell us
so we can max the use of 1 labour hour
tells us if use 1 labour hour to produce this product how much profit this 1 labourhour contributes
how to calculate contribution per unit of resource
contribution of oneunit of a product/no of units of resource required
give example of limiting factor
number of labour hours
number of machine hours required > capacity of machine hours avaialable
we must only produce the …. of a unit
mkt demand
how to find required machine hours
machine hours per unit x estimated sales/mkt demand
when allocating what is important
look at the hours that are used by teh unit you are satisfying
i.e 2,000 units use 12,000 hours so if only got 6k hours left can only produce 1,000
when we’ve allocated the resources what do we do
calculate profit /contribution
how do we calcualte profit/contribution
contribution * units sold
