Graph Paper

limiting factor is a factor that the activities of the organization. The most limiting factor is the sales, because a company can not sell the entire product that is produced.

limiting factor analysis help companies identify the scarce resources and use the best combination of available resources to maximize profits. Limiting factor in an organization or a company could commodities, working time, time machine. Limiting factor analysis can be applied where there is only one limiting factor involved. In cases where there is more than a limiting factor, we use linear programming or simplex method.

linear programming with mathematical model, which is solved by using mathematical equations. The common area in the graph paper is feasible region. The simplex method can only be solved with spreadsheet software like Microsoft Excel. In the limiting factor analysis, we help each product (sales less variable costs) and then divide the contribution per unit of limiting factor. Suppose that N is scarce commodity (ie there is a limiting factor) Example (The figures are based on per unit of each product):

A Product Price: $ 100; product B Sale Price: $ 200

A variable costs : 50 € Product B: variable costs 135 $

contribution per unit A .......... 50 $

contribution per unit B .......... 50 $

N per unit of A 10 Kg

N per unit of the B 20 Kg Therefore

:

contribution per kg A ..........50/10 = 5

contribution per kg b .......... 65/20 = 3.25

As you can see a product per Kg contribution is larger than the product B, so that all efforts should be made to get as many units as possible, a product. After the production of all units of the company, even if some commodity kg N, then it should use to the product as short-N products are depending on the contribution per kg, in order to maximize profitability.

Muhamamd Salman Siddiqui is a webmaster and developer, but he is also interesting in accounting related topics.He runs numerous entertainment websites.Some of them are:
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