Key Factor

I have seen your lecture and this is what I understood by that. Please correct me if I am wrong.

Key Factor Analysis is where we have one limited resource (i.e. limited machine hrs or Labour hrs) and we are to produce the product which gives us the highest contribution return so we do have to calculate contribution per unit of each product and rank them to see which one to produce first.

We need to calculate contribution per unit of every product because we are making different level of units for each product which takes one limited resource every time we make a single unit so we have less limited resources left to produce other products.

Optimal Plan is where we produce highest contribution product first then second highest contribution product and so on until the last product which we have to limit according to the limited resource left.