Limiting factor analysis Watch

tony333
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I have no idea whether i am answering these questions correctly because there is no model answer. Could you please outline answers for the attached
questions.

Question 1
Petgoods Ltd manufactures pet collars for the domestic market. There are two products Dog Collar and Cat collar. The Dog Collar has a Selling price of £150 per unit and Cat collar of £150 per unit.

Variable costs are as follows:
































Dog Collar
Cat collar

Materials £/kg
5
15

Labour £/hr
8
8

Var. Pro. Overheads £/unit
2
2







Weekly production data is
































Labour hours
Materials kgs
Demand Units
Dog Collar
12
2.5
275
Cat collar
9
1.5
315
Total resources available
6,000
1,200







Fixed costs are estimated at £12,000 for the next period.

You are required to:

a) Identify which of the resources is the limiting factor
b) Calculate the contribution per unit
c) Calculated the contribution per limiting factor
d) Rank the products in order
e) Prepare the optimal production plan and state the quantities that will maximise profit.
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aliman65
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If you still need help I can provide answers for you?
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MahmoodReza
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Step 1: Calculate how many hours and kg needed to produce number of products demanded
Step 2: Compare to resources available, shortfall - limiting factor
Step 3: Calculate unit contribution (SP-VC)
Step 4: Based on step 2, divide step 3 by the hours/kg per product
Step 5: Highest from step 4 = number 1
Step 6: Highest rank gets produced first (up to demand level), and resources remaining used for next product

If you upload your answer in the forum I can comment further (further info at http://knowledgegrab.com/)
Hope this helps
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tony333
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I still need help
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MahmoodReza
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You need to be more specific - have you tried an answer & hit a brick wall? Which aspects of the approach outlined are you finding difficult ?


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tony333
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(Original post by MahmoodReza)
You need to be more specific - have you tried an answer & hit a brick wall? Which aspects of the approach outlined are you finding difficult ?


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I don't understand the 1st step. How to identify the limiting factor when it is not given.
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MahmoodReza
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Re Step 1: Calculate how many hours and kg needed to produce number of products demanded

A dog collar requires 12 labour hours and demand is 275 units; a cat collar
requires 12 labour hours and demand is 315 units,
total labour hours needed =(12*275) + (9*315) = 6,135 hours, 6,000 hours available - therefore a limitation

A dog collar requires 2.5 kg materials and demand is 275 units; a cat collar
requires 1.5 kg materials and demand is 315 units,
total material needed =(2.5*275) + (1.5*315) = 1,160 kg material, 1,200 kg available - therefore no limitation

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