Limiting Factor PLEASE HELP

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hope someone can help me solve this:

PRODUCT A:
Selling Price £90
Direct material cost/unit £18
Direct Labour hrs/unit 3
Variable Overheads £29

PRODUCT B:
Selling price £101
Direct material cost/unit £21
Direct labour hrs/unit 3.5
Variable overheads £33

Planned production was units 200 for A and B.
Due to machine breakdown only 80% of planned labour hours will be available.

How to:
Calculate the total labour hours originally planned and the labour hours now available in the month?

Thanks in advance for any help! :P

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Limiting Factor PLEASE HELP

    Seems a bit strange, it looks like a limiting factor question but from your question you don't have to calculate what the new production is?

    Originally Planned Labour Hours
    200 units * 3hrs = 600hrs
    200 units * 3.5hrs = 700hrs

    total = 1300hrs (originally planned)

    80% of 1300hrs = 1040hrs (now available)


    Or was it that the original units to be produced was a combination of products A & B adding up to a total of 200 units and not 200 units of each?

    Adrian
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Limiting Factor PLEASE HELP

    I was pretty much going to say what Adrian said but got distracted by the golf half way through writing and he nipped in first :)

    If the planned production of A & B adds up to 200, I can't really see that there's any way of answering the question.

    I suppose it's a limiting factors question because you're working out the limiting factor. I wouldn't be surprised if the question went on to ask you to work the new production.

    Chris

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Limiting Factor PLEASE HELP

    Hi, Limiting Factor Analysis is all about getting the most amount of Profit out of a bad situation. Here are some examples. If they don't turn out too well on the post then PM me and I will send you the notes. :D

    Limiting Factor Analysis

    PRODUCT
    A B C
    Selling Price 20 25 30
    Variable Cost 15 15 5
    Cost Per Unit 5 10 25
    Rank 3 2 1

    •Rank in the Highest contribution first = in order to maximise profit.
    •This decision in only applicable if there are no restrictions on resources
    o Materials
     Quantities
     Money to spend
    o Labour
     Hours
     Money to spend
    o Overheads
     Hours
     Money to spend
    •Therefore a decision on producing the production that gives the highest Cost per Unit per Limiting Factor

    Example Page 83 of Course Notes

    Bill makes
    PRODUCT
    R S
    Selling Price 120 50
    Variable Cost 70 25
    Cost Per Unit 50 25
    Rank 1 2

    Limiting Factor – Kilo’s of Material

    Limiting Factor = CPU / Limiting Factor
    R S
    = 50/7 25/2.5

    Contribution / Limiting Factor (Kilos of Material) = £7.14 £10.00
    RANK 2 RANK 1
    Class Example Page 84 Of Course Notes

    PRODUCT
    A B C
    Selling Price 80 20 45
    Variable Cost 24 6 15
    Other VC 20 8 12
    Cost Per Unit 36 6 18
    Rank 1 3 2
    Labour 24 6 15
    Cost/£ of Labour£ 1.50 £1.00 £1.20
    New Rank 1 3 2


    Optimum Production Plan

    Maximum £ for Labour Available £6000
    Product A 200 units x 24 (£4800)
    £1200
    Product C 1200 ÷ CPU 15 = 80 units
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Limiting Factor PLEASE HELP

    damn :( as I expected the post did not turn out too well, do you want to PM me and I will send you my notes :)
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Limiting Factor PLEASE HELP
    lincs wrote:
    Or was it that the original units to be produced was a combination of products A & B adding up to a total of 200 units and not 200 units of each?

    Adrian

    Thank you everybody for your replies.

    200 is for each product. Yes I think I have to calculate the new production with the limited hours available.

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Limiting Factor PLEASE HELP
    CJC wrote:
    I was pretty much going to say what Adrian said but got distracted by the golf half way through writing and he nipped in first :)

    If the planned production of A & B adds up to 200, I can't really see that there's any way of answering the question.

    I suppose it's a limiting factors question because you're working out the limiting factor. I wouldn't be surprised if the question went on to ask you to work the new production.

    Chris

    I'm back again, my head goes around and around this task...
    yes, now i have to calculate the contribution per limiting factor per product, but how come?
    should I divide for product A for example the available hours:
    480 : 200 units= 2.4
    or the original hours
    600 : 200 = 3

    I dont know which one to use for answer that particular question!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Limiting Factor PLEASE HELP

    I've written an example of how to proceed when there are limiting factors which might help - http://www.cjcnet.net/wiki/tiki-index.php?page=limiting+factors

    Chris
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Limiting Factor PLEASE HELP

    CJC I looked at your notes but they don't answer at my particular question. It's the same situation I have seen also in my books while I have a diffent one.

    Lets take PRODUCT A:

    Selling Price £90
    Direct material cost/unit £18
    Direct Labour rate £7
    Direct Labour hrs/unit 3
    Variable Overheads £29

    units:200

    Original Hours available 600
    Limiting Hours available: 480

    SOLUTION:

    Contribution: 36
    Labour: here what to use? 2.4 (480:200) or 3 (600:200)?
    Contribution par labour: 15 or 12 (depends which one is used on labour)

    In all the exaples I have seen it has been used always the original hours or whatever and then you rank it for determine which product to make. But what's happen when they gave you already the limiting factor before the task?

    I'm so confused... :?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Limiting Factor PLEASE HELP

    The amount of labour hours needed to make each unit doesn't change just the amount of hours available. The question tells you it takes 3 hours to make Product A - problems with the machines aren't going to change that.

    So it's really no different from a standard limiting factor question.

    Chris
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Limiting Factor PLEASE HELP

    Hi, I am really stuck on this assignment and i need your help and advise, im stuck, trying to find the limiting factor, this is really holding me back and I cant seem to move on, any advise? Thanks.

    Product A
    Selling price: £14000
    Material Cost: £9000
    Labour Cost: £2800
    Demand: 250
    Time Taken Days: 0.5

    Product B
    Selling price: £15500
    Material Cost £9800
    Labour Cost £3360
    Demand: 160
    Time Taken Days: 0.6

    Product C
    Selling price: £16000
    Material Cost: £9280
    Labour Cost: £3920
    Demand: 100
    Time Taken Days: 0.7

    Product D
    Selling price: £15,500
    Material Cost: 9,670
    Labour Cost: 3,080
    Demand: 180
    Time Taken Days: 0.55

    There are 330 working days and orders for each car: Fixed costs for the year are expected to be £965,400.
    Managing Director has told you that the annual profit must be at least £500,000 and cost saving must be made in fixed costs if this minimum figure cannot be otherwise archived.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Limiting Factor PLEASE HELP

    Hi guys, i found out what it was, the limiting factor is time.

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