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I do not know how to find limiting factor in throughput accounting, here you in this question I have no idea how to do it.
LMN company produces 3 types of fabric naming L, M and N. Like other businesses in the industry LMN wants to maximize profits. But recently it has been told about bottle neck resources. LMN is not aware about what a bottleneck resource is.
Following information is provided:
Selling price per unit is $5, $7, $9 respectively for L, M and N
Material would normally cost $0.1, $0.3, $2
Labor cost per unit is $2, $2.5 and $1.5 for L, M and NMachine time per unit in minutes:
L M N
Spinning. 3 5 7Weaving. 4 5 6
Processing. 2 5 8
Sales:
L 1,200
M 1,500
N 1,700
Maximum time available:
Spinning 20,000 minutes
Weaving 23,000 minutes
Processing 24,000 minutes
Operating expenses
$8,000If you calculate the total time that would be needed on each machine to produce enough to meet the sales demand, you will find that it would need 23,000 minutes of spinning time; 22,500 minutes of weaving time; and, 23,500.
Therefore there is enough time available on weaving and processing, and it is spinning that is the bottleneck because there are only 20,000 minutes available.
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