Unit 6: ECR Limited Factors
Gal_NikNak
Registered Posts: 7 New contributor 🐸
Does anyone have a system to help them deal with Limited Factors / creating production plans. I just cannot get my head around it.....
:crying:
:crying:
0
Comments
-
- Find the contribution per unit
- Then find the amount of limiting factor required per unit (eg skilled labour hours)
- Divide the contribution per unit by the limiting factor per unit to get a contribution per limiting factor
- Look at each product and rank them making the one with the highest contribution per limiting factor rank 1
- Then go back to the amount of limiting factor available
- Multiply the rank 1 product limiting factor per unit by the maximum sales to find how many skilled labour hours it will need for maximum production. If this is less than the skilled labour hours available take this off
- This leaves a reduced number of skilled labour hours,
- Repeat the process with the second and then the third ranked product until there are not enough skilled labour hours available
- Then take the total skilled labour hours left and divide by the hrs per unit for that product
- This will enable you to list the optimum production mix.
Sandy
sandy@sandyhood.com
www.sandyhood.com0 -
Look at this example
taken from the Dec 2004 ECR paper
link to paper
http://www.aat.org.uk/other_files/ECRDec04questions.pdf
start at page 12
Sales and production in units 1,000 200 500 1000 200 500
Selling price per unit £50 £120 £80 £50 £120 £80
Direct materials per unit £10 £24 £16 £10 £24 £16
Direct labour hours per unit – moulding centre 2 4 3 £10.00 £20.00 £15.00
Direct labour hours per unit – glazing centre 0.5 4 1 £3.00 £24.00 £6.00
Direct labour rate per hour – moulding centre £5 £5 £5
Direct labour rate per hour – glazing centre £6 £6 £6
Contibution per unit £27.00 £52.00 £43.00
Glazing hrs per unit 0.5 4 1
Contribution per glazing hour £54.00 £13.00 £43.00
rank 1 3 2
Total hrs available 1400
rank 1 Alpha 1000 units x 0.5 hrs per unit 500
hrs remaining 900
rank 2 Gamma 500 units x 1 hrs per unit 500
hrs remaining 400
rank 3 Beta 400 hrs/ 4hrs per unit
= 100 units 400
So the optimal production mix is
Alpha 1000 units
Gamma 500 units
Beta 100 unitsSandy
sandy@sandyhood.com
www.sandyhood.com0
Categories
- All Categories
- 1.2K Books to buy and sell
- 2.3K General discussion
- 12.5K For AAT students
- 318 NEW! Qualifications 2022
- 161 General Qualifications 2022 discussion
- 11 AAT Level 2 Certificate in Accounting
- 56 AAT Level 3 Diploma in Accounting
- 87 AAT Level 4 Diploma in Professional Accounting
- 8.8K For accounting professionals
- 23 coronavirus (Covid-19)
- 272 VAT
- 92 Software
- 273 Tax
- 135 Bookkeeping
- 7.2K General accounting discussion
- 200 AAT member discussion
- 3.8K For everyone
- 38 AAT news and announcements
- 345 Feedback for AAT
- 2.8K Chat and off-topic discussion
- 582 Job postings
- 16 Who can benefit from AAT?
- 36 Where can AAT take me?
- 42 Getting started with AAT
- 26 Finding an AAT training provider
- 48 Distance learning and other ways to study AAT
- 25 Apprenticeships
- 66 AAT membership