decision making techniques limiting factor analysis

Question 1

what jus a limiting factor

Answer 1

a factor that is inn scarce supply that limits production oof grids. the company can usually only operate at the amount of the scarce resource.

Question 2

what are examples of limiting factors 5

Answer 2

1.limited demand

2.skilled labor

3.material

4.machine capacity

5.limited finance

Question 3

what is the use 0fm limiting factor analysis for firms

Answer 3

companies will decide to use their limiting factor in a way to maximize contribution and so Maximise profit

Question 4

what would be there forms approach if there was only one limiting factor

Answer 4

total contribution will be maximized by earning the highest possible contribution per unit

Question 5

what would bw there firms approach if there was 2 limiting factors

Answer 5

1. identify the scarce resource
   2.calculate the contribution per unit of each product (SP- VC).
   3.calculate the contribution per unit of the scarce resource
   4.rank the products in terms of contribution per unit
   5.allocate resources using this ranking

Question 6

what is linear programming used for

Answer 6

if there are 2 resources in short supply linear programming can be used

Question 6

what does it do in

Answer 6

maximise contribution

minimize costs

Question 7

how to find optimal solution for how much to produce with multiple limiting factors

4

Answer 7

1. define variables
2. figure out constrain or limiting factor
3. after graph is drawn establish the feasible region for the optimal solution

4.determine optimal solution

Question 8

what is slack

Answer 8

it is the amount by which a resource is being underutilized

Question 9

how can you tell when there is no slack at all

Answer 9

optimal solution comes when 2 constraint lines cross and then there is no slack

Question 9

how can you Tell there is slack graphically

Answer 9

for other constraint lines , the fact that the optimal solution is not on these lines means that the resources are not full utilized , so there will be slack

Question 10

why is slack important

Answer 10

1. for critical constraints if you get more of it, it will improve them optimum solution e.g higher contribution ( there is 0 slack in this state)
2. for non-critical constraints gaining or losing a small number of units of resource will have very little effect on the total contribution

Question 11

what is a shadow price

Answer 11

the increase in contribution created by the availability of one additional unit of the limiting factor at the original cost

Question 12

how to calculate shadow price

Answer 12

1. take the simultaneous equations that intersect at a point
2. add one unit to the constrain concerned e.g 4x+45= 56+1 (the plus one is the additional resource added )
3. calculate the revised optimal contribution. the increase in contribution from old one to the new one is the shadow price.