Assessment 2 question 1.7

Could someone please help me with how they got the answer for optimal production (units) and the maximum profit? I attached the picture

Best Answer


  • Casu777
    Casu777 Registered Posts: 7
    Do you know how to rank the products for the order of production?
  • Rose20
    Rose20 Registered Posts: 7
    yes! Thank you I just worked out the optimal production :)
    Could you help me with the maximum profit? (b)
  • Rose20
    Rose20 Registered Posts: 7
    @Norvydas thank you very much! That was very helpful and I now understand it ☺️
  • Rio
    Rio Registered Posts: 7
    How do you work out contribution per limiting factor ? cant work it out :(
  • Norvydas
    Norvydas MAAT Posts: 272 Dedicated contributor 🌟 🐵 🌟
    @Rio screenshot the question where it asks you to work it out and I'll break it down for you.
    Kind Regards,

    Norvydas Valavicius.
  • sophie_612
    sophie_612 Registered Posts: 136 Dedicated contributor 🌟 🐵 🌟
    Norvydas said:

    Hi @Rose20,

    Optimal Production Units;
    You have 1,600kg of Material Available. The first product you will produce is the product that has higher contribution per limiting factor rate. Therefore Product Y will be the 1st product we will produce, then Z & X. Okay so we have 1,600 kg material, to produce Product Y in full we need 480kg, we have 1,600 kg available, therefore we can produce all 600 required units of Product Y. Now we have left 1,120 kg of material available. To produce product Z we need 720kg, we have that therefore we can produce product Z in full aswell, Now we are left with 400kg of available material. To produce Product X in full we need 800kg of material, however we only have 400kg therefore we can only produce half of product X (200units).

    Maximum Profit;

    Product Y - 600 produced units x £1.60 = £960
    Product Z - 400 produced units x £2.70 = £1,080
    Product X - 200 produced units x £2.50 = £500

    Profit; £2,540
    Fixed Costs; £755
    Revised Profit; £1,785

    P.S. You are probably wondering why we are using Contribution Per Unit £ cost when working out the profit rather than Contribution Per Limited Factor £ cost, it's because the contribution we will receive in regards of profit is measured by Contribution Per Unit cost. Contribution Per Limited Factor cost is only used when we have limited availability of material or labour to see which product is most beneficial in producing in respect of material / labour shortage.

    Hope this helps.

    do anyone know how they got fixed costs of £755 for the revised profit?

  • Pian32
    Pian32 MAAT Posts: 474 Dedicated contributor 🌟 🐵 🌟
    It's given in the question. Last line of the initial text.
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  • sophie_612
    sophie_612 Registered Posts: 136 Dedicated contributor 🌟 🐵 🌟
    Pian32 said:

    It's given in the question. Last line of the initial text.

    thank you so much didnt read question properly :/
  • Annaoj90
    Annaoj90 Registered Posts: 16
    Hi @Rose20
    Where did you get this Task 1.7 regarding limiting factors from?
    I’m using Kaplan and couldn’t see this one in my study material

  • Mannaesi
    Mannaesi Registered Posts: 80
    hey@Norvydas and others ,can you kindly also help me with payback and net present value calculations if perhaps you covered it,
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