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There are 2 topics when limiting factors are considered:
1) throughput accounting
2) planning with limiting factorsWhen question is to maximise profit in milti-product decision making, contribution is calculated for ranking of products. for 1 st case we use (sale price – direct material cost), while for 2 case we use (sale price – all variable costs)
Could u please, clarify how to distinguish what method of calculation should I use?In specimen exam at ACCA website (CBE) 9th question confusing a while? Why did they use 2 case for ranking rather than 1 case?
We normally use key factor analysis (i.e. contribution per limited resource) unless the question specifically says that it is a throughput accounting situation.
Also, throughput accounting only applies anyway when the limited resource is machine time.
I assume that you have watched my free lectures on key factor analysis and on throughput accounting (and, of course, the most common limiting factor topic which is linear programming).
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