4 Planning with limiting factors Flashcards Preview

F5 Performance Management > 4 Planning with limiting factors > Flashcards

Flashcards in 4 Planning with limiting factors Deck (12)
1
Q

If there is a limiting factor, how should this be solved?

A

With key factor analysis

2
Q

What is the steps in key factor analysis?

A
1. Identify scarce resource
2. Calculate contribution per unit for each product
3. Calculate contribution per unit for the scarce resource for each product
4. Rank the products in order of the contribution of the scarce resource
5. Allocate resources using this ranking
3
Q

If there is several limiting factors, how should this be solved?

A

Linear programming

4
Q

What is the steps to linear programming?

A
1. Define the variables
2. Define and formulate the objective
3. Formulate the constraints
4. Draw a graph identifying the feasible region
5. Solve for the optimal production plan
5
Q

What does the feasible region show?

A

Those combinations of variables which are

possible given the resource constraints

6
Q

What does limiting factor analysis assume?

A
• There is a single quantifiable objective
• Each product always uses the same quantity of scarce resource.
• The contribution per unit is constant
• Products are independent
• The scenario is short term
7
Q

What is slack?

A

slack is the amount by which a resource is
under utilised, i.e. slack occurs when the maximum availability of a resource
is not used

8
Q

Why is slack important? (2)

A
• For critical constraints (zero slack) then gaining additional units of these scarce resources will allow the optimum solutions to be improved
• For non critical constraints - gaining or losing a small number of units will have no impact on the optimum solution
9
Q

A

Is the increase in
contribution created by the availability of one additional unit of the limiting
factor at the original cost.

10
Q

What will non-critical constraints show?

A

11
Q

How do you calculate shadow prices?

A
1. Take equations of the straight lines
2. Use simultaneous equations to solve
3. Calculate revised optimal contribution
12
Q

What are the implications of shadow prices?

A
1. Management can use shadow prices as a measure of the maximum
premium that they would be willing to pay for one more unit of the scarce
resource.
2.