Chapter 6 - Budget preparation (Limiting factors)

Question 1

Key budget factor (Limiting factor)

Answer 1

Is the element or resource of the business that is likely to place imitations on the activities of the business.

Question 2

Problem solving of material shortages

Answer 2

• Seeking an alternative supplier
• Finding an alternative material
• Manufacturing an alternative product
• Buying in finished goods for resale

Question 3

Problem solving of material shortages - short term

Answer 3

• Using materials held in inventory
• Using finished goods held in inventory

Rescheduling purchases

Question 4

Problem solving of labour shortages

Answer 4

• Increase the overtime worked
• Use sub contractors
• Use up finished goods held in inventory
• Buying in finished goods inventory
• Improving labour efficiency

Question 5

Problem solving of capacity shortages

Answer 5

• Build up inventories in advance
• Additional shifts
• Buying in finished goods
• Renting equipment or premises