ECR - Limitations Confusion!! :(

Nikzzy

Hi all,

I'm looking through past papers for the ECR exam and I just cant seem to get my head round this particular part...

Im studying with Kaplan, and in the past papers in the work book when finding the ranking for limitation they take the contribution per unit and divide it by the labour hour per unit.

When i did the practise CBA on here they took the contribution in total and divided it by the number of tonnes used to get the ranking, because of what I had seen on past papers I took the contribution per unit and divided it by the tonne used per unit, which was wrong and gave me a different ranking.

How do I know if I am supposed to use the full contribution or contribution per unit?

Sorry if this is a very simple question but just cant get my head round it.

Help would very much be appreciated!!!

Thank you

SandyHood

You will not know what is limiting production until you look at your exam question.

I had a potato products question where we had a staff shortage one week.
If staff time is in short supply, find out how much contribution each product you make earns per labour hour.
Then share out the limited labour hours so that the contribution is maximised; i.e. start with the product where we earn the highest contribution per labour hour.

You might have a baker where oven space is in short supply. So look at the products he bakes and then divide the contribution per product by the oven time, to give contribution per oven hour.

You mentioned a raw material (per tonne). When material is in short supply you will earn the maximum contribution possible by allocating that material to products produced on the basis of the contribution each product earns per tonne of material used.

Have you ever been short of milk in the morning. You have to make a judgement about using it for tea or cereal etc. If you had a cafe and were selling these products, then I hope you'd have a clearer idea of which you'd choose to sell the milk in first (on the basis of contribution per 50ml of milk)