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Machine hours per unit
Product X 5
Product Y 2.5Cost of materials per unit
Product X dollar 10
Product Y Dollar 5
Contribution per unit
Product X dollar 20
Product Y. Dollar 15
Identify limiting factor
Recommended which product business should make and sell assuming that demand is unlimited sir I can’t understand this questionThe limiting factor in this scenario is the machine hours per unit. Product X requires 5 machine hours per unit, while Product Y requires 2.5 machine hours per unit.
To identify which product the business should make and sell assuming unlimited demand, we need to calculate the contribution per machine hour for each product.
For Product X: Contribution per unit = $20, Machine hours per unit = 5 Contribution per machine hour for Product X = $20 / 5 = $4
For Product Y: Contribution per unit = $15, Machine hours per unit = 2.5 Contribution per machine hour for Product Y = $15 / 2.5 = $6
Based on these calculations, the business should focus on producing and selling Product Y as it has a higher contribution per machine hour.
Sir why we divide total labourhours available with labour hour per unit to get number of units
You must watch our lectures on limiting factor analysis
Demand is unlimited means there is no restriction on the number of units you can sell
Machine hours are the limiting factor
Product X requires 5 machine hours per unit, while Product Y requires 2.5 machine hours per unit.The business should make and sell the product that requires fewer machine hours per unit, which is Product Y.
An organisation is experiencing a shortage of resources and has graphed a potentional linear programming solution which shows its first product , TV, on the horizontal axis and its other product tablet computers , on the vertical axis.
The iso- contribution line to solve the linear programme is very flat and downward sloping.
Which of the following statements is likely to be true for the company?
Correct answer is : The contribution per unit for the tablet computers must be higher than that for TV.
My wrong answer : The contibution per unit for TV must be higher than that for the tablet computers.
What am I missing?The iso-contribution line represents the combinations of TV and tablet computers that yield the same total contribution.
So i believe if the iso-contribution line is very flat and downward sloping, it indicates that the contribution per unit for TV is higher than that for the tablet computers.
This means that producing and selling each unit of TV generates more contribution compared to each unit of tablet computers.
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