Limiting Factor

Question 1

Description

Answer 1

Budget process that starts from maximum constraint

Question 2

Advantage

Answer 2

Theoretically the right way to budget

Question 3

Disadvantage

Answer 3

Very Slow and costly - Because each year the budget has to be redone from the start with an updated forecast

Question 4

What is limiting factor analysis used for?

Answer 4

To maximise contribution per limiting factor

Question 5

Limiting factor analysis procedure

Answer 5

*Identify total amount of each factor
*Calculate contribution of each product per unit of limiting factor
*Rank products high to low according to contribution per limiting factor.
Allocate capacity to maximise output pf highest ranked product an then work down.