Home For AAT student members AQ 2016 Professional Diploma in Accounting Management Accounting: Decisions and Control

Limiting Factor

I seem to be struggling with Limiting Factors and have my exam this afternoon can someone tell me how you work out what the Contribution per Limiting Factor is for this and how to get to it?
The only part I can work out is the Contribution per unit



  • crispycrispy Trusted Regular SouthamptonRegistered Posts: 456

    With the attached question it does not tell you what the limiting factor is, so will have to calculate ourselves to establish what it is. So........

    In order to fulfil total sales demand:
    Materials (2,000 x 2) + (11,000 x 3) = 43,000 Kgs
    Labour (5,000 x 1) + (11,000 x 2) = 27,000 hours

    As we only have 20,000 labour hours we can see that we are limited by this facor.
    J H
    Contribution per Unit £7 £9
    Labour Hours per Unit 1 2
    Contribution per limiting factor £7 £4.50

    We therefore should be looking at maxing our production of Jackal as it produces a higher contribution per limitng factor. Therefore we should produce:

    5,000 X Jackal = 5,000 hours (5,000 X 1)
    7,500 X Hyena = 15,000 hours (7,500 X 2)

  • SineadpSineadp Registered Posts: 67

    Thank you so much for your help I understand this now.
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